Calamos Investments is expanding its innovative 'Structured Protection' suite of defined outcome ETFs with a groundbreaking new fund: the world’s first ETF offering full capital protection on Bitcoin.
Scheduled for listing on the Cboe BZX Exchange on January 22, 2025, the Calamos Bitcoin Structured Alt Protection ETF – January (ticker: CBOJ US) will carry an expense ratio of 0.69%. This launch represents a significant milestone for both the ETF industry and digital asset investors.
John Koudounis, President and CEO of Calamos Investments, stated, “I am excited to announce the world’s first 100% downside protected Bitcoin ETF. This is consistent with our history of groundbreaking innovations in risk management.”
Matt Kaufman, Head of ETFs at Calamos, added, “Many investors have been hesitant to invest in Bitcoin due to its epic volatility. Calamos seeks to meet advisor, institutional, and investor demands for solutions that capture Bitcoin’s growth potential while mitigating the historically high volatility and drawdowns of this fast-growing and high performing asset.”
What Are Defined Outcome ETFs?
Defined outcome investing refers to a strategy that tailors the risk and return profile of a reference asset or index. The goal is to provide specific levels of protection and upside potential, delivering a more controlled and predictable investment experience.
These funds are designed to limit downside risk while still offering participation in the upside of volatile assets like Bitcoin.
How the Capital Protection Works
Calamos’s Structured Protection ETFs utilize Flexible Exchange (FLEX) options to deliver 100% downside protection. These are customizable, exchange-traded option contracts guaranteed by the Options Clearing Corporation.
For the CBOJ ETF, the target index is the CBOE Bitcoin US ETF Index. Protection levels are referenced from the start of a one-year outcome period.
The 100% downside protection is achieved by limiting potential upside returns. A cap is determined at the outset of the outcome period based on prevailing market conditions.
These ETFs employ a perpetual structure, resetting their downside protection and caps at the end of each annual outcome period. This enables investors to benefit from fresh terms without needing to reinvest manually.
Key Considerations for Investors
While the promise of full capital protection is compelling, investors should be aware of two important mechanics.
First, due to the time value of the underlying options, these ETFs are likely to exhibit lower betas compared to traditional index-tracking ETFs. This means they may underperform their reference asset during strong upward market trends.
Second, the fund’s full downside protection applies only from the start of the outcome period. An investor purchasing shares mid-period may be exposed to downside risk if the underlying asset has appreciated since the period’s inception.
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To address these challenges and ensure transparency, Calamos offers daily disclosures for its Structured Protection ETFs. These updates include the remaining cap, any potential downside before the capital protection takes effect, and the number of days left in the outcome period.
A Growing Suite of Protected ETFs
CBOJ will build upon the firm’s Structured Protection ETF series, which launched in 2024. The suite already includes 100% downside protection strategies for major indices like the S&P 500, Nasdaq 100, and Russell 2000.
This expansion into digital assets signals a growing demand for risk-managed exposure to cryptocurrency among both institutional and retail investors.
Frequently Asked Questions
What is a capital-protected Bitcoin ETF?
A capital-protected Bitcoin ETF is an exchange-traded fund designed to shield investors from losses in their initial investment while still providing exposure to Bitcoin's price movements. It uses options strategies to limit downside risk.
How does the downside protection work?
The protection is achieved through Flexible Exchange (FLEX) options, which cap potential upside returns in exchange for guaranteeing 100% protection against losses from the start of a defined outcome period, typically one year.
Is the capital protection guaranteed?
Yes, the 100% downside protection is a defined feature of the fund's structure, guaranteed through exchange-traded options contracts from the beginning of each outcome period.
Can I lose money with this ETF?
An investor could experience a loss if they buy shares after the outcome period has begun and the net asset value has increased. The protection is only effective from the period's start date for those holding shares at that time.
What is the expense ratio for this Bitcoin ETF?
The Calamos Bitcoin Structured Alt Protection ETF carries an expense ratio of 0.69%, which covers the cost of the options strategy and fund management.
How often does the protection reset?
The fund’s outcome periods last one year. At the end of each period, the downside protection and upside cap reset to new levels based on current market conditions.