Resetting buffers optimizes structured notes
The guest argued that actively rolling buffered ETFs and structured notes into new series when they approach their upside caps resets downside protection and avoids asymmetric downside risk.
The argument
When a buffered instrument approaches its cap, the investor faces limited remaining upside but full exposure to a market pullback. The speaker advocates cutting the series early and reloading into a new series to establish a higher downside buffer.
The thesis, stress-tested
✓ What validates it
- ✓Market pullback occurs after resetting buffer, protecting capital
- ✓Issuer credit spreads remain stable
▸ Risks discussed
- ▸Credit risk of the issuing bank
- ▸Time deterioration limits upside near the cap
Hear it yourself
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