Samsung Asset, Asia's First 'Buffer-Type ETF' Listed

As volatility in overseas stock markets increases, a 'buffer-type exchange-traded fund (ETF)' that can cushion losses up to 10% in a down market while seeking about 16% gains in an up market (based on US dollars) will be listed on the domestic stock market. The buffer-type ETF is the first to be listed not only in Korea but also in Asia.

Samsung Asset Management announced on the 25th that the 'KODEX US S&P500 Buffer March Active' ETF will be listed. It invests in the US Standard & Poor's (S&P) 500 index and aims to cushion a decline of about 10% at the end of the outcome period by utilizing options. It uses the 'S&P 500 10% Buffer Index Series' announced by S&P Dow Jones in September last year as a benchmark index.

When the S&P 500 index falls, a buffer to cushion losses is constructed using one-year maturity options. The characteristic is that one-year maturity options are traded every year from March to the following March to create a buffer that cushions a decline of about -10%. Since the cost of setting the buffer is covered by selling call options, the maximum upside (cap) is limited. The cap was set at 16.4% (based on US dollars). Because options are rolled over (liquidated and reinvested) every year, the cap level fluctuates every March depending on the cost.

On the 21st (US Eastern Time) around 2 p.m., based on the market average price of the S&P 500 index at 5650, put options were purchased, and the buffer lower bound was set at 5075, which is about -10.2%. The call option premium strike price to cover the cost of purchasing the put options was set at 6575 (corresponding to a cap of 16.4%).

This product is considered suitable for investors who expect the S&P 500 index to move between 5075 and 6575 by March 20 next year. In a down market, even if the S&P 500 index falls to 5075, it seeks to cushion losses to 0% at the end of the outcome period (based on US dollars). If an up market is expected, gains can be realized even if the S&P 500 index rises up to 6575. This is about 7% higher than the all-time closing high of 6147.43. However, since it is exposed to currency risk, the final return may vary depending on the won-dollar exchange rate fluctuations.

Although the profit structure pursued by the buffer-type ETF is set on a one-year basis, due to the nature of ETFs being traded like stocks, they can be bought and sold at any time. However, since the option maturity is one year, the value of the options varies depending on the timing. It is important to note that the profit structure may differ depending on the timing of purchase or sale.

Samsung Asset Management provides daily updates on important indicators such as the cumulative return trend of the buffer-type ETF, the remaining ETF cap achievable if held until maturity, and the remaining ETF buffer on the KODEX website.

Im Taehyuk, head of the ETF Management Division, explained, "Samsung Asset Management is introducing the buffer ETF, which has grown to about 90 trillion won in the US, to Korean investors for the first time in Asia," adding, "We will continue to supply various US investment solutions considering the investment tendencies and management objectives of Korean investors who are serious about US investments."

Samsung Asset Management holds the largest number of 15 S&P 500-related ETFs domestically, including ▲ the representative US investment product S&P 500 ▲ the S&P 500 currency-hedged type to prepare for won-dollar exchange rate declines ▲ the S&P 500 sector series investing in representative industries ▲ and the S&P 500 OTM daily covered call, which participates in market gains while seeking regular income.

This content was produced with the assistance of AI translation services.