Over the past few years, investor interest in bitcoin and cryptocurrency has steadily risen. That being said, many advisors and investors still have reservations about what cryptocurrency might do to a portfolio’s risk profile.
The Calamos suite of Structured Protected Bitcoin ETFs is designed to help address these concerns. Each fund offers exposure to bitcoin’s price return, along with the crucial addition of a downside protection overlay over an outcome period.
One of these Calamos funds, the Calamos Bitcoin Structured Alt Protection ETF – January (CBOJ), blends bitcoin upside with complete downside protection across a one-year outcome period, aside from fees and expenses.
The other two funds are the Calamos Bitcoin 90 Series Structured Alt Protection ETF – January (CBXJ) and the Calamos Bitcoin 80 Series Structured Alt Protection ETF – January (CBTJ). Before fees and expenses, CBXJ and CBTJ protect 90% and 80% of the investment principal, respectively, from any losses incurred by the funds across their outcome periods. These lower downside protection profiles come with higher caps on potential bitcoin upside.
Blending Downside Security With Crypto Upside
At face value, these funds can sound too good to be true because the Calamos funds offer significant risk mitigation profiles, which seem to run contrary to the high-risk/high-reward expectations of bitcoin investing.
However, these strategies are the real deal. Here’s how they work:
Calamos Bitcoin Structured Protected ETFs operate with a three-pronged approach. The first prong of the strategy uses option contracts on the CBOE Mini Bitcoin U.S. ETF Index. CBOJ uses at-the-money calls, while CBXJ and CBTJ instead employ in-the-money calls that are lower than the asset price.
Meanwhile, the second prong focuses on fostering capital protection by buying 1-year zero coupons that return at their original price upon maturity. While these bonds may seem redundant, the fund buys them at a discount and utilizes them to preserve portfolio value across its outcome period.
The third prong of the strategy utilizes short OTM FLEX call options on the CBOE Mini Bitcoin U.S. ETF Index. These sold call options generate proceeds that balance out the spending that occurred during the other two stages. Notably, the strike price for these OTM calls is what creates the upside cap for the respective fund.
All in all, the strategy behind these Calamos funds is fairly straightforward. The fund invests for both bitcoin exposure and downside security, and balances out its expenses by selling OTM calls. As such, investors may want to consider these ETFs for building bitcoin exposure with a responsible risk profile.
For more news, information, and analysis, visit the Crypto Channel.
Disclosure Information
Calamos Investments LLC, referred to herein as Calamos, is a financial services company offering such services through its subsidiaries: Calamos Advisors LLC, Calamos Wealth Management LLC, Calamos Investments LLP, and Calamos Financial Services LLC.
Before investing, carefully consider a Fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-866-363-9219. Read it carefully before investing.
Each fund’s prospectus and statement of additional information is not an offer to sell such fund’s securities and is not soliciting an offer to buy such fund’s securities in any state where the offer or sale is not permitted.
The Funds seek to provide investment results that, before taking fees and expenses into account, track the positive price return of the CME CF Bitcoin Reference Rate – New York Variant (“BRRNY”) (“Spot bitcoin”) up to a predetermined upside cap (the “Cap”) while seeking to protect against 100%, 90% or 80%, respectively, of losses (before total fund operating fees and expenses) of Spot bitcoin over a period of approximately one (1) year (the “Outcome Period”). The Funds will not invest directly in bitcoin. Instead, the Funds seek to provide investment results that, before taking total fund operating fees and expenses into account, track the positive price return of Spot bitcoin by investing in options that reference the price performance of one or more underlying exchange-traded products (“Underlying ETPs”) which, in turn, own bitcoin and/or one or more indexes that are designed to track the price of bitcoin (“Bitcoin Index”).
The Target Outcome may not be achieved, and investors may lose some or all of their money. The Funds are designed to achieve the Target Outcome only if an investor buys on the first day of the Outcome Period and holds a Fund until the end of the Outcome Period. While the Funds seek to provide 100%, 90% or 80% protection against losses experienced by the price of Spot bitcoin for shareholders who hold Fund Shares for an entire Outcome Period, there is no guarantee a Fund will successfully do so. If a Fund’s NAV has increased significantly, a shareholder that purchases Fund Shares after the first day of an Outcome Period could lose their entire investment. An investment in the Funds is only appropriate for shareholders willing to bear those losses. There is no guarantee the Capital Protection and Cap will be successful, and a shareholder investing at the beginning of an Outcome Period could also lose their entire investment.
An investment in the Funds is subject to risks, and you could lose money on your investment in a Fund. There can be no assurance that a Fund will achieve its investment objective. Your investment in a Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in a Fund can increase during times of significant market volatility. The Funds also have specific principal risks, which are described below. More detailed information regarding these risks can be found in the Funds’ prospectus.
Digital Assets Risk: The Bitcoin network was first launched in 2009 and bitcoins were the first cryptographic digital assets created to gain global adoption and critical mass. Although the Bitcoin network is the most established digital asset network, the Bitcoin network and other cryptographic and algorithmic protocols governing the issuance of digital assets represent a new and rapidly evolving industry that is subject to a variety of factors that are difficult to evaluate. Moreover, because digital assets, including bitcoin, have been in existence for a short period of time and are continuing to develop, there may be additional risks in the future that are impossible to predict as of the date of this prospectus. Digital assets represent a new and rapidly evolving industry, and the value of the Underlying ETPs’ shares depends on the acceptance of bitcoin. The realization of one or more of the following risks could materially adversely affect the value of the Underlying ETPs’ shares.
Investing involves risks. Loss of principal is possible. The Funds face numerous market trading risks, including authorized participation concentration risk, underlying ETP risk, cap change risk, capital protection risk, capped upside risk, cash holdings risk, concentration risk, clearing member default risk, correlation risk, costs of buying and selling fund shares, counterparty risk, derivatives risk, equity securities risk, FLEX options risk, interest rate risk, investment in a subsidiary, investment timing risk, liquidity risk, management risk, market maker risk, market risk, new fund risk, non-diversification risk, options risk, OTC options risk, position limits risk, premium-discount risk, secondary market trading risk, sector risk, tax risk, trading issues risk, U.S. Government security risk, U.S. Treasury risk, and valuation risk. For a detailed list of Fund risks see the prospectus.
100%, 90% or 80% capital protection is over a one-year period before fees and expenses. All caps are predetermined.
Cap Rate – Maximum percentage return an investor can achieve from an investment in a Fund if held over the Outcome Period.
Protection Level – Amount of protection a Fund is designed to achieve over the Days Remaining.
Outcome Period – Number of days in the Outcome Period
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