Are Calamos Protected Bitcoin ETFs Right for Your Clients?

Alternatives and options-based investing are in Calamos Investments’s DNA, and the global investment firm is extending its alternative investing heritage and equity options expertise to protected Bitcoin ETFs.

The investment company’s founder, John Calamos, began using options as a risk management tool for brokerage clients in the 1970s, when Calamos Investments was established.

Today, Calamos oversees more than $16 billion in alternatives, with the majority of total fund assets in options-related strategies, including its latest innovation: protected Bitcoin ETFs.

The Options-Based ETF Boom

Last week, etf.com hosted a webinar on what’s driving the advisor adoption boom in options-based ETF trading, during which featured panelist Matt Kaufman, SVP, head of ETFs at Calamos Investments, discussed how these unique exchange-traded funds work.

Amid today’s economic and market environment challenges, downside protection may be at its highest demand in years.

Kaufman noted that much of the demand coming from financial advisors originates from their clients.

“We’re seeing nearly 100% of [advisors] being asked about Bitcoin,” said Kaufman. “I think we’re in the very early innings of providing exposure to Bitcoin in a portfolio.”

Calamos Protected Bitcoin ETFs

For investors and advisors uncomfortable with full exposure to Bitcoin’s risk but who want to participate in the crypto’s upside potential, Calamos created its suite of protected Bitcoin ETFs. These options-based funds capture Bitcoin’s upside potential with 80%, 90% or 100% downside protection over a one-year outcome period.

CBTA: 80% Downside Protection Bitcoin ETF

The Calamos Bitcoin 80 Series Structured Alt Protection ETF - April (CBTA) has two main features: It follows Bitcoin's positive price moves up to a set maximum, and it limits potential losses to 20% over a one-year period, before fees and expenses. This means even if Bitcoin's price crashes by more than 20%, your loss in the ETF is capped at that 20%.

CBXA: 90% Downside Protection Bitcoin ETF  

The Calamos Bitcoin 90 Series Structured Alt Protection ETF – April (CBXA) seeks to track Bitcoin's gains but with a strong safety net. It offers 90% protection against Bitcoin price declines between 10% and 100% over a year. This means that no matter how severely Bitcoin's price drops during that time, your maximum loss within the ETF is capped at just 10%, before fees and expenses.

CBOA: 100% Downside Protection Bitcoin ETF

The Calamos Bitcoin Structured Alt Protection ETF – April (CBOA) is designed to match the positive price return of Bitcoin up to a defined cap while protecting against 100% of losses over a one-year period, before fees and expenses.

The Bottom Line

Calamos's suite of downside protection Bitcoin ETFs offers investors and advisors a novel approach to navigating the volatile cryptocurrency market. By providing a defined cap on potential gains in exchange for a significant buffer against losses, these structured products aim to offer a more controlled and potentially less anxiety-inducing exposure to Bitcoin.  

While the capped upside may not appeal to all, the defined downside protection could be particularly attractive to risk-conscious investors seeking participation in the digital asset space without the full brunt of its notorious price swings. Ultimately, understanding the specific mechanics and defined outcomes of each series is paramount for determining if these innovative ETFs align with individual investment objectives and risk tolerance in the evolving landscape of digital assets.

Investors should note that returns will differ if investors buy or sell shares in the mid-outcome period. “About half the money comes in on day one, and they hold for the outcome period. Other folks will buy in the middle; they’ll see opportunities for upside capture, and as they’ve captured [gains] then they’ll move into some other [series],” said Kaufman.