ETF Spotlight: CBOJ, the Calamos Bitcoin Buffer ETF

Amid the surging popularity of cryptocurrencies, the recently launched Calamos Bitcoin Structured Alt Protection ETF (CBOJ) offers a unique proposition by combining potential upside exposure to Bitcoin with built-in downside protection. 

This novel approach seeks to mitigate the inherent volatility of the cryptocurrency market, making it an attractive option for investors seeking a more controlled exposure to bitcoin. 

Learn how CBOJ works, including its pros and cons, and how to determine if this alternative defined outcome ETF can make an addition to your portfolio. 

Calamos Bitcoin Structured Alt Protection ETF: How CBOJ Works

CBOJ employs a structured investment strategy that aims to capture a portion of bitcoin's potential upside while limiting downside risk. The ETF is designed to provide 100% downside protection over a one-year outcome period. This means that even if bitcoin's price declines significantly during this period, the investor’s principal is protected. 

However, this downside protection comes at the cost of capping the potential upside gains. The ETF's estimated cap is 11.65%. 

Investors should also note that defined outcome ETFs, also known as buffer ETFs, are intended to hold for the entire defined outcome period. Late entry may limit upside potential or downside protection. CBOJ was launched Jan. 22. 

Pros and Cons of Investing in CBOJ

While CBOJ offers a combination of downside protection and upside protection, there are potential drawbacks for investors to consider: 

Pros

• Downside Protection: The primary advantage of CBOJ is its built-in downside protection, which can significantly reduce investment risk. 
• Limited Upside Potential: While the upside potential is capped, it still offers the opportunity to participate in bitcoin's potential growth. 
• Diversification: CBOJ can be used to diversify a portfolio and provide exposure to the cryptocurrency market while mitigating some of the risks associated with direct bitcoin investments. 

Cons

• Limited Upside Potential: The capped upside potential may limit returns compared to direct bitcoin investments, especially during periods of strong market growth. 
• Late Entry: If you invest after the defined outcome period has already begun, you may not fully benefit from the original downside protection parameters that were in place at the start of the defined outcome period. 
• Fees: The ETF carries an expense ratio of 0.69%, which can impact overall returns.  
• Complexity: The structured nature of the ETF can make it more complex to understand compared to traditional investment options. 

Who Should Invest in CBOJ?

CBOJ is not suitable for every investor but may be an appropriate investment option for investors who: 

• Are interested in bitcoin but concerned about its volatility. 
• Seek limited downside risk while still participating in some potential upside of bitcoin. 
• Have a short- to intermediate-term investment horizon. 

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing in CBOJ involves risks, and investors should carefully consider their investment objectives and risk tolerance before making any investment decisions.  

At the time of publication, Kent Thune had no positions in the securities mentioned.