At this point, many advisors may have accepted that investing in bitcoin comes with significant price volatility.
During any given point during the week, bitcoin’s price could easily swing upwards or downwards, based on asset performance, macro conditions, or even a combination of both. Due to this price volatility, the price of bitcoin can greatly vary between the start and the end of the week. As such, risk-adverse advisors might find crypto exposure to be a bit of a hard sell.
What if there was a product that could mitigate 100% of bitcoin’s downside exposure? Some advisors would assert that such a strategy would be too good to be true. However, that framework is exactly what Calamos Investments offers through some of its Protected Bitcoin ETFs.
How Downside Protection on Bitcoin Works
For instance, take a look at how the Calamos Bitcoin Structured Alt Protection ETF – April (CBOA) works. CBOA’s objective is to provide upside exposure to Bitcoin with an initial cap rate of 10.98%, while offering 100% downside protection over a one-year outcome period minus fees and expenses.
This downside security is achieved in part through buying one-year zero coupon bonds that specifically return par at maturity. Since these bonds are then redeemed at maturity for either par or 100% of value, CBOA can make sure an investor doesn’t experience significant loss of capital.
Meanwhile, the fund uses option contracts and FLEX call options to gain upside exposure to the CBOE Mini Bitcoin U.S. ETF Index. However, this upside exposure is subject to a cap during its outcome period.
By employing CBOA in one’s portfolio, advisors and investors can take part in price rallies while remaining steadfast in the face of cryptocurrency volatility. While traditional spot bitcoin funds may experience significant loss during bitcoin price plunges, CBOA manages to keep a far steadier track record.
Looking ahead, it’s difficult to see whether 2025 will turn out to be a bullish or bearish year for crypto. However, regardless of the outcome, CBOA will continue providing 100% downside protection (over a one-year outcome period) in the face of bitcoin volatility.
For more news, information, and analysis, visit the Crypto Channel.
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.
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.
Calamos Financial Services LLC, Distributor
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