Animal Spirits Podcast - Talk Your Book: Checking in on Buffered ETFs

Episode Date: November 14, 2022

On today's show, we have Bruce Bond, CEO of Innovator ETFs give us an update on the buffered ETFs, how buffers and caps behave during high-volatility environments, how advisors are using these products, and much more!   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. ​​ (Wealthcast Media, an affiliate of Ritholtz Wealth Management, received compensation from the sponsor of this advertisement. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information.) Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is presented by Innovator ETFs. Go to Innovatoretefs.com to learn more about their buffered ETFs and listen to our talk right now with Bruce Bond from Innovator ETFs. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Batnick and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritt Holt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, the first time we spoke with Bruce Bond at Innovator was 2019 maybe. We did so in a we-work building in Chicago,

in a basement somewhere. True. It felt like a storage closet. But we've now talked to him five or six times now. Very impressive a guy. He's been around the ETF industry for a very long time. I think one of the best parts about Bruce is that he does not try to overcomplicate things. He keeps things very simple and explains them in a simple manner, even products that could, to some, be construed as a little more complicated. Yeah. What did I say? I said, like, what are some of the, I can't remember what I asked him. But he basically, yeah, he tried to downplay, or not downplay, but he tried to say, like, don't overcomplicate this. And so buffered ETFs have had a lot of success because investors like to be able to determine the level of risk.

So, for example, an investor is willing to say, hey, for me, for me and my risk tolerance, a 10% buffer downside with a 15% cap, you know, whatever the terms would be, that makes sense. I'm willing to be buffered. So anyway, I think investors are behaviorally attracted to that sort of thing, which is not. Not only was that not a surprise to us. I think we were bullish on this from the beginning. The other interesting thing to me was we know because of the way these things are priced that options, prices are impacted by volatility. And typically if you're using options, the best time to sort of get your most bang for the buck is when the market is volatile, like it has been. And he was saying that that volatility led to a huge increase in the caps

because the downside is the same on these things. But the caps can fluctuate based on the volatility levels and the options pricing. And that has made their caps kind of go crazy right now, which would make sense. You have more room to the upside after stocks are already down, but I was surprised at how big those caps, how much higher those caps have gone. So these things, even though they're not like super exotic, they're not necessarily plain vanilla. And so one of the potential misunderstands that we cleared up in the show is that even if you have a buffer, on a price basis, you can be below the buffer that only kicks in at the outcome date. So they have like an amazing education suite. And so to learn more,

about the potential risks involved and different features involved in seeing this, we will link to this in the show notes to their education center. Yep. Now, here's our talk with Bruce Bond. We are joined again today by Bruce Bond. Bruce is the CEO of Innovator Capital Management and their whole suite of Buffard ETS, which we're going to get into today in great detail. Bruce, thank you for rejoining us today. Thanks for helping me, fellas. Happy to be here. So we spoke with you several times. I don't remember the first time I guess it was like maybe 2019-ish. I guess you would know.

Well, when did you start the company? Yeah, yeah, 2018, probably. We talked shortly after we started the company. So, yeah. August of 2018 was the first buffers that came out. And so it was shortly after that we had our first call. So zero to $10 billion in four years, just over four years. Congratulations.

I'm guessing that's not like an accomplishment that's been matched by too many new fund families. And one of the things that Ben and I said early on was this is going to attract assets because people love certainty and they like to define their outcome. And so what we're going to get into today is some of the strategies. Let's start with maybe the most plain vanilla of them all, the buffer ETFs. What are you seeing in terms of how advisors are using them for clients today? We're seeing two primary ways. One way is there getting out of equities or straight up, naked equities, as I call it, where they just have exposure to the upside and the downside, and they're moving some of that equity exposure into the buffers to reduce their downside risk,

but still give them potential for the upside. If you think about this market right now, nobody knows, is it still going down? Is it going to go off? Where is it going from here? Guys are moving into the buffers to protect the downside, but get the upside if all of a sudden the market shoots up. Secondly, we've seen over the last year numerous advisors moving in. out of fixed income into the buffers, buffering, really think of it as your low-risk assets. You're moving out of their other low-risk assets, which used to be bonds, into the buffers

to buffer their downside risk, but to give them access to the upside of the market, if the market moves up. I have to push back a little, well, I'm not push back on anything, but explain to me why somebody would protect the downside after the downside already came. In other words, I thought that these make a whole lot of sense. on the way up, but why would you buy insurance after the storm hit? Tell me the thinking behind doing that. Well, I think for most people, they don't know if the storm's done. Fair. We might be 50%, 60%, I mean, who do we really know? No one really knows. And I think nobody wants to make their money

twice. They want to know, I made my money, I'm good. And you know what they're not trying to do is get every single penny out of the upside that they can get. What they're trying to do is buffer for their downside and they might be saying at this point, hey, you know, I've kind of learned my lesson. Bonds, I lost more in bonds than I did in equities this year. I'm trying to get a third category that can protect my downside, but give me some access to the upside. And so they're not moving all their money into it, but they're using as another allocation to be able to bring additional risk management exposure into their portfolio. Do you see advisors that are changing the caps that they use over the floors? So correct me if I'm wrong, but there's a 9%

protection, there's a 15% protection and a 30% protection. Now that stocks are down 20, 25%. If it's a NASDA, it's more like 30, 35, same thing with small caps. Do you see people moving up so they increase the floor a little bit to give themselves some more upside if we do have a rally? To Michael's point, I mean, hey, if you want to get more of the upside, you can go to a lower buffer at this point. Maybe you're in a 15 or a 30% buffer. You're really very conservative. Now you're saying, okay, I'm just going to buffer 9%. I don't know if it'll go down another 9%, but I'm not willing to lose that. But the current 9% buffer of November, you know, it gives you 28, 29% of the upside. I mean, most people are like, okay, I can take that

amount of the upside of the market returns, but still have a buffer on the downside. I mean, they're looking out through next year saying, I don't know how much better this is going to get. There is a lot to unpack with these ETFs. There's options under the hood, which we don't necessarily need to get into. But what you need to know is there's a tradeoff, like everything else. the more you want to protect, the less upside you're going to have it's, I don't know if it's linear exactly, but the tradeoff, you could see it over time. And so credit to you guys, because on your site, I imagine this is updated every day. You see very clearly the outcome period, the reference asset. In this case, I'm looking at SPY. You see the starting buffer and the starting cap.

But there's a lot to unpack because there's a lot of moving parts. One of the things that's important for investors considering this to know is that the buffer kicks in at the end of the outcome period. Can you talk about how that works? That's a great point. So the way to think about it is, let's choose a 9% buffer. The beauty of these, like you mentioned earlier, is you have a known outcome. So you know that if the market's down 9% over the next year, you have a 9% buffer. You're not going to lose anything other than the management fee you pay. That's what you're going to lose. The knowledge of that is what people love. Now, you also know you only get so much of the upside. I just mentioned it's like 28% right now if you bought at the beginning of November.

So you know, okay, market's down nine, I don't lose. Markets down 10, I lose 1%. Markets down 11, I lose 2%. So as the market goes down, you will lose past 9%, but you get up to 28% of the upside. So now, during the year, you're going to see this portfolio is going to trade around because remember, it's a basket of options. The options market prices things differently than the equity market. So they're not going to track right on top of each other. So if the market goes down, let's say 5% in the first week, you're going to trade down. I mean, you're going to be down maybe half the amount of the market or a third amount of the market, especially early on. But as you get closer to the very end when these options exercise, you're going to go pretty much exactly to where

you should be, which that means is if the market's still down 5% at the end of the year, these things are going to move up and you're going to lose zero. And that's just how they works. So I'm looking at B-JAN and the underlying is SPY. The outcome period is January 1st of the year through December 31st, the end of the year. It's a 12-month period. And the starting buffer, assuming you bought it on January 1st, correct me if I'm saying it if it's not right, assuming you put on January 1st, you have 9% protection at maturity at the outcome period, which is December 31st. And the starting cap was 13.54%. So basically you're thinking, okay, great, I am protected against the first 9% of losses.

So if it's down 20, I lose 11 plus a management fee. But if the market's up 10%, I get 10% of the markets up 20%, the most I can get is 13.5%, 13.5%. And I think investors are very attracted to that sort of, okay, I'm like, literally, I could live with that. I know exactly what my risk and my reward is. Yeah, you make your deal up front, you make your deal up front and you're like, okay, I'm good. Yeah, no surprises. Unless you don't realize that, again, you can lose more than 9% if, if, if, if you sell it before the outcome period.

So right now it's November 7th, the S&P 500 is down 19.5% year-to-date. This B-JAN is down 13%, which is more than the 9% but again, the 9% kicks in at the end of the outcome period. That is like very important. Very important to know that you have to hold this ETF. The reason we tell you it's B-JAN is because you know. know on the 1st of January each year, reset. So you need to hold it from January 1 basically to the end of December or January 1. January 1, January 1 is the payoff period or the outcome period. And so you have to hold it, hold it to the end to get the full benefit of those options.

And then it should pay off exactly as you expect. Now, in the middle, what happens? In the middle, it doesn't move around nearly as much as the S&P 500. It's mitigated. Now, it could be down. if it's down more than the S&P 500, which is very rare that it would ever be down more than it. But it's telling you, the options market's telling you, it could go down. It thinks the S&P 500, the spy, could go down more. And so that's all that that's telling you. But you need to hold it through the end of the period in order to get your full pay on. Since these strategies are made using options, has the volatility this year actually increased the caps of people coming in at because of the options pricing or does that not really impact it that much? Absolutely. I mean, think of what

we're talking about last year was 13.49, I think, was the cap. Right now, your cap is 28%. You still get the 9% buffer, but you get 28% of the upside instead of 13% of the upside. So that's the beauty of these. When you have more volatility and more risk in the market, you get more upside. And so, like if you thought about buying it last year, you might have been making the agreement with yourself, hey, I can live with 13% each year going forward. The great thing to know is that the market it sells off, you're going to get more of the upside of the market when it resets. That's a way bigger spread than I would have solved. That's a huge jump. So that's just because what is the reason for that besides like the getting into the nerdy options pricing

stuff? What's the psychological reason there? Is it that people aren't buying as many call options when the market goes down or why is that? There's one thing that's called skew. And that's really how many options or how many calls and puts are being bought. And that's just skew within the options market. But another big thing is that there's more dividend yield of available. Remember the dividend yield, you don't get the dividend yield with this. And therefore, we're taking that dividend yield and we're purchasing options with that dividend yield. And so we have more yield, therefore we can purchase. We need to make up for less and therefore our cap is higher. So it's a zero sum. So I don't want to get down in the nitty gritty too much,

but basically higher yields, better skew gives you higher caps. Bruce, I was taught by Eddie Elfin Bind, and I'm not accusing you of this. I'm just saying this is a funny joke. When somebody asked a question that's in the weeds that you don't know how to answer. And again, I'm not saying you. I can't answer this. Their correct responses, it's pretty technical. You probably would understand. Yeah, right. I should probably say that. It's pretty technical. But, I mean, the idea is there's more to work with, therefore the caps go up and therefore it's all options pricing. The thing to know about the basket of options, whether it's the 9%, the 15% and 30%, it's designed so it has zero cost to the investor. It's a net cost.

zero cost package. So that's the reason we have to set the cap. The cap funds the rest of the package. And so where we sell that call, which you give up, whatever's above the call, that's what you need that money. So in a volatile market or in higher dividend yielding market, you can sell the calls at a higher price and that's what sets your cap. And that's the reason the cap moves up. I'm curious to hear how people are using these products. Would somebody, is this designed to be bought and held, or is this really designed to be opportunistic? It's really designed to be bought and held is what it's designed for. And the reason we did this was because we looked at a lot of the risk management tools that were available to advisors in the marketplace today. A lot of them

are low-val, men-ball, or they're switching between cash and equities. And you know what? I mean, I've brought a lot of products out in my career, and they work until they don't. All of a sudden, switching at the wrong times or you're getting whips on by the market and things just don't work. And so we saw a lot of value in a risk management tool that allows you to know ahead of time. This is the agreement I'm making with myself or with my client. I'm good with these outcomes. I'm good with this. And you know, the day you invest, you're done.

There's no switching and all this stuff that goes on within the portfolio. You're not even betting that old correlation norms between bonds and equities. hold up. You're not making any of those bets. You're saying if the spider goes here, I get this, and it goes here, I get that, and I'm good with that. And that's the purpose of this. You mentioned that a lot of advisors you're talking to are actually taking some money out of bonds to put into your buffered products. I think this year probably is one of the reasons that's happened because the aggregates down, I don't know, 15 or 16 percent right now. That's the benchmark most people use for their bonds. That's like a total bond market fund. I don't know

that many people had that built into their baseline assumptions that this could happen in bonds. You could make the case that this is a once-in-a-lifetime repricing of interest rates that we've gone from the floor to four or five percent, and you may never see that magnitude move again, but I would imagine people are changing the way that they think about the bond allocation because something like this could happen where you could see double-digit losses. Do you think that's helping make advisors more comfortable with your products because they're seeing this much volatility and fixed income? Absolutely.

I think they are realizing for the first time in their lives that bonds can be high-risk. you're not at always low risk. I mean, you move out on the duration scale, rates move against you. I mean, think about it. I mean, the bonds are down as much as the equity market is down. People would have never dreamed that. And so I think that what they're thinking through is, okay, this historical relationship between equities and bonds or fixed income doesn't always hold up. And so you need to have other risk management tools available to you. And one of the things, one of the products that we have are some of the others that are meant to mimic bonds. If you can have your, instead of just calling bonds bonds, those are your conservative assets, your safe assets. So if you can have some of that in fixed income and some and something like this, just thinking about the bond portion of your allocation. When I think about equities, they do tend to move a little differently than bonds. that tends to really provide negative correlation in that fixed income piece of your portfolio. We're seeing that we believe that they will be held as some of these safe assets over on the

fixed income side for the foreseeable future. The great thing about the market, what it has done is got people to use these products. And they're like, yeah, you know what, these have serious applications for me. And they're starting to realize that for a lot of their clients. I see the benefits of a product like this psychologically. I would never bucket this mentally as a fixed income substitute because it's not fixed income. It has different risk characteristics, but certainly it's something unique that sits between stocks and bonds.

Would you say that's accurate? That's fair? Yeah, I think that's totally fair. It's like a third category. It's not an equity. It's not really fixed income, but it kind of fits between the two. So sometimes you have to make adjustments to historical norms in order to protect your assets. I'm looking at what are innovator buffer ETFs.

And as mentioned, there's one for every month. I'm looking at SPY. Again, you've got the 9, the 15, and the 30, and there's one for every month. And so you see the starting buffer, you see the starting cap. But at least on this, I don't necessarily see where it is today in relation to the buffer. So in thinking about this, if I wanted to implement this, where would I start? How would I even know which product to you? Do you guys have relationship managers where I can call an innovator and say, hey, here's

what I'm looking to accomplish. What do you think? I know that you're not necessarily advisors, but how does that work? Absolutely. If an advisor is like, wow, this is intriguing is something I potentially would be interested in using. They can call Innovator and we can walk them through and talk to them about their portfolio. We even have some services where we can give them some additional insight into their portfolio and how they might want to allocate using a buffer. So we have all those things available at Innovator to help them make sense of this for themselves. I'd be curious to hear what lessons you've learned in the four or so years that you've been doing this because I wouldn't say these are like super complicated, but they're

definitely more complex than what most investors are used to dealing with. What has been the most common potentially misunderstood aspect of how these buffer ETFs work? That they're complicated. No, just teasing you. One of the things, I would say that if it is true, if you think about it, almost any new thing that we get exposed to seems complicated on face value. Until we get in, we use it, and we start to understand it, and then you start to realize, you know what, it is new, but it's not overly complex. I mean, think about a municipal bond, for example. If you had never bought a municipal bond and you didn't know about sinking bonds and call dates and is it a G.O. or Rev. I mean, there's a mutual bond. I mean,

there's a myriad of the ways you can lose money on a municipal bond. Most people don't understand all that, but they buy municipal bonds. And once you get in and you understand them, you're like, oh, okay, they're not necessarily that complicated. With the buffers, they pretty much are what you see. Now, the only time is one of the points you brought up earlier is that they don't track exactly. When the market's down five, you're not still sitting at zero. There is some movement with the buffer. and so you have to wait to the end of the outcome period that's one thing that people need to keep in mind

and then the second thing they need to keep in mind is if you want to buy in the middle of an outcome period like today if you wanted to buy January because you don't think the market's going to go any lower and you can get that upside you can capture some of that disparity that you're seeing in the pricing

you need to really know what you're doing and you need to go to the innovator website you can buy any of these ETFs every day if you go to the innovator website you can see what your cap is on that day, what your buffer is on that day, when the end of the outcome period is. But it gets a little more complicated when you buy in the middle. If you just buy at the beginning, which 90% of people do, you buy at the beginning of the outcome period and you just let it roll, it's really pretty straightforward. You get this much upside, you have this

much buffer, and you can know what you have. It's when you try to do things in the middle or try to sell in the middle. That's when it gets a little more complicated. But if you just hold it the outcome period. It's really very straightforward and there's not a lot more to know. So you said that these things are meant to be bought and held and that tracks, but I'd be curious to hear your thoughts on a situation where there's like an incredible year and the cap is whatever, 15%. If the market's up 15%, why would you still hold because you're not getting any more upside and you could only potentially lose if the market goes down? Like if you're at the cap entry year, why would you not take advantage of a strong market?

sometimes people will roll they'll say okay i'm up 15% i'm capped out i'm going to roll in the beginning of the next month what do you do if you're doing that you're lock in that game now you have a buffer right at zero you've locked in that gain and you can continue to do that through time and so that's like a step-up strategy you know you're locking in each month you're rolling up you're grabbing that gain and holding that game so you can do that a lot of people do that so there is a lot of downside. There really isn't any downside to doing that. But some people, they're just like, look, you know what, I'm not going to actively manage this thing. I'm not going to try to capture that. I'm okay, like we said, knowing I have a 9% buffer over the year and knowing I had this much

upside, I'm just going to let it run. I'm good with that. And so they're not market timers. They're not trying to call those shots mid-year. They're okay with the gain again. I think one of the biggest insights I've had is that there are, obviously, millions of investors that are willing to give up whatever's above the cap, which is what? That's a great problem to have. That's the two birds in the bush. Right. Well, that's the two birds in the bush. It's a bird in the hand versus two birds in the bush. You have a known buffer versus the potential of getting capped out. Well, how bad is that? So you get the buffer. Maybe you will get capped out, but there's a good chance you won't, especially at 28%. I think that's the reason we're seeing some of the flow.

those we're seeing today, they're like, okay, I mean, I'll take 28% with a no built-in. Yeah. What is the 28% in reference to? That's the current cap of the November series for the nine buffer. Okay? If you bought at the beginning of November, you got 28% upside at 28-something, you know, it's roughly, but I'm just giving you a rough number, 28% of the upside with a 9% buffer. Not bad.

Michael, you could have used these to head your wedding back in the day, instead of shorting S&P 500. Exactly. Too soon, Ben. Yeah, that ring wouldn't have cost you double now. So, Bruce, I think sometimes better to be lucky than good, and it sounds like you've been both, but there's been two huge bear markets now since you launched these four years ago. The first one was very quick. This one is more long and drawn out.

Is there any surprise to you or to your clients or to your team on how these products have fared, or have they done exactly what you thought? do given the circumstances of the different environments, and especially this bear market that's been going on for 10 months now? They have done exactly what they're supposed to do. And so they have delivered just what we expected. And I think, you know, those snapback markets where they drop down and shoot right back up. I mean, we did get some great flows in those periods. But the bear markets we've had in the past, these V-shaped markets, I mean, they make people feel like the market never goes down. Well, I think we're in a different period today. And so I think we're a little more drawn out

and, oh, I can actually lose a lot of money and the market could stay down for a little while. Well, yeah, that's how it is. And I mean, when the government can't pump the market full of a bunch of dollars when it goes down because inflation is breathing down a snack, this is what you get. See, Ben? Told you. So I think there's a situation we're in. And so they can't inflate the market. right now. And so we're just going to have to live through it. The market's going to have to digest this. How are these treated for tax purposes? Great question. So another beauty of this and the reason you might not want to trade out of it if you're not in some type of qualified

account is each time it rolls over, you defer your gain. So there is no cap gain distribution or we don't anticipate, I should say, a cap gain distribution in these ETFs. And so you defer, just like all ETFs. You're deferring that gain. You're compounding a large and large number through time with the same resetting that buffer every year through time. That's really powerful. If you do sell, I assume that there's short-term tax implications. Is there anything funky because of the options underlying this? Or does that not impact it? No, no. Remember, you only pay short-term if you sell in less than a year. If you hold it over the year, you're paying long-term. Okay. If we look on your website right now, on the bottom here it says that you have a

New listing coming could be out by the time we launched this podcast. It says the Innovator Equity Managed Floor ETF. Is this something completely new? Is this kind of building on the products you have? What's going on to this one? This is kind of building on the products we have. And it's U.S. large cap exposure, just like the ones we've been talking about. It's a little bit different that it's a managed product.

And what we mean by that is it has basically laddered one year 10% floors. Okay, no, we've been talking about buffers. Now, the difference between a floor and a buffer. A buffer is your buffered for the first 9% we've done. Now, you have a floor at 10%. Now, what that means is you can lose 10%, but you can't lose any more after that. Okay, so the market goes down 50%, you only lose 10.

That's how a floor works. And so these are quarterly floors that are built into this product. And what we expect, we're doing shorter-term selling of cover calls, and we think we can give you pretty much the upside of the U.S. equity market with a 10% floor. That's the beauty of this product. Now, we're working on Parametric. This is the one that they are managing for us as a sub-advisor. Now, the big thing, though, this one versus the buffers, is that you don't have a defined outcome with this.

You're not buying at the beginning and you're saying this is what I know I get at the end. We're counting on the management to put the floor in. for you. Now, why would you do this versus the buffer? Well, the reason you would do this is because you want an absolute loss. I can't lose any more than this. And you also want to get more access to the upside. So in this managed scenario, we can sell short-term calls, raise more premium. Now, I was telling you the dividend yield and the premium are really what pay for the package. And so we can give you a much higher cap than we would just in a normal buffer. which gives you more participation on the upside.

So this is a great long-term whole product, too, if you want to do something like that where you don't have to think as much about what month you're buying and when it's resetting and these kind of things. This is just a fund structure. It's not like it's going to be released every month or quarter. Right. It's one structure you buy in any time.

You don't have to worry about when you buy in or any of that. I don't understand this better on the upside. So you said that there's not really a cap. So the downside is basically capped at 10%. You're not going to lose more than that. The options are going to be managed around that somehow. And the upside is kind of going to be what the stock market is going to be less an option's cost. Well, now, there is a cap on it, but the cap is elevated.

It's above our current caps because... Okay. It's going to be a moving target like the current ones, kind of, depending on the options pricing. Yeah, right, depending on the options pricing. But the other thing is, is you get a lot more premium. Like, remember, I was telling you, what sets our cap is when we sell that call out one year on the traditional buffers. Well, now we're selling calls at a week, two weeks, three weeks a month. So very short term calls. When you sell shorter term calls like that, you're able to

raise more premium, and that allows you to get more of the upside. And so that's the reason we've introduced this, to give people more access to the upside of the U.S. equity markets with a floor on losses. What would you estimate the upside to be now if you have that 10% floor, if you had to guess? I don't have it handy right now. I would have to get back to you guys with that and happy to do that. Bruce, I know it's not your job to tell people want to buy these products, but there are factually better and worse times to buy these based on how much volatility is in the market. The more volatility there is, the higher the premiums, the higher the caps, the more upside,

or is that not necessarily the case? I would say that the worst time to buy these products is when you're in a long-term trending bowl market, that there's very little volatility. Right, like 2017. Right, or even 18, 19. When we started talking, you know, we were in that fairly consistent bull market just running up a 10-year bull market, and there's just not a lot of volatility. It just keeps moving up.

What that does is it shrink your caps way down. Now we're in a completely different market. There's dividend yield in the market, so we're going to have better caps. We're going to be able to provide people better payoffs. And so in a relative value standpoint, now is a better time because you can get more the upside. Are you all producted out or like I mentioned maybe single securities or fixed income? Is there anything exciting on the horizon that you could talk about? The one that I think I talked to you guys about last time, which I'm excited about. Nobody's bought this product really other

than me and some other people, but it was hedge Tesla. And so I don't know if you guys remember that. But I mean... Well, Tesla's getting smoked. So talk about it. Oh yeah. It's a quarterly product. And it gives you access. You have a 10% floor on it. So you can't lose more than 10% in Tesla. And you get about 10% of the upside. I think right now it's more like 9% of the upside. Every quarter. So it does that every single quarter.

And so our feeling is, look, we think Tesla is a good company long term. I, for example, I had an old position in Tesla. I was up like well over 1,000%. And so I sold that position and bought this thinking, okay, Tesla, in my opinion, could get smoked at any time. I mean, I don't know I might be in a minority on that. But I think with all these other electric car companies coming out, there's going to be significant competition for them coming into the marketplace. And they're the only big one.

I mean, think about everybody, Facebook, everybody has been hit pretty hard if they miss. I think Tesla is out there. It's one of these ones with these crazy multiples. And I know people believe in it. But I personally decided I wasn't willing to let 1,000% hang out there. I was going to roll into this, put a floor on what I could lose. Good for you. But still give myself temperament.

percent up every quarter. And so I think it's a great company in the future, but do I think it's going to give me 100 percent? No. Over the next year? No. Just got cut in half. That 51 percent from its size. Unreal. Wow. Yeah, exactly. It was at a trillion. It's not going to two trillion. Is it going to be bigger than Apple? No. It's not going there. And so I think people could really smart to sell that position, roll into this if you love Tesla or roll half of it in or something. I took my whole position off and did that, and I think it's a great investment. You're not having to buy like an inverse of Tesla. You're still investing in Tesla, but you're putting a floor on what you can lose,

and I think it could be off 50% easily in a quarter. One more for me. We get a lot of questions from viewers in our audience about products that can produce income from options strategies. What do you think about options, not so much to hedge, but as a way to collect income for your portfolio? Okay. So we look at a bunch of these cover call writing strategies, and I'm not a big fan of those. We looked at bringing cover call, you know, the ones that I shares just brought out where you write it on YG and AGG and all this to enhance the yield. And listen, over time, you're just paying people their capital back. And I just couldn't get comfortable with bringing those products because I didn't think they added enough to the bottom line. So we forfeit doing those. We just said we're not. going to do them. They're not a good investment over time. So what we are willing to do,

though, we are going to bring out some new strategies in the future here and that we think are worthwhile doing. We're pretty excited about those and we'll be talking more about those in the future. Perfect. Okay. Where can we send people to learn more? Go to innovatoretFS.etops.com. InnovatoretFS.com. Thanks, Bruce. Appreciate it. Thank you very much. Thanks for having me today. Thanks to Bruce for coming on again. Remember, check the disclaimers on our blogs. Go to Innovator ETFs to learn more about the buffer ETFs and send us an email Animal Spiritspot at gmail.com.