Autocallable ETFs

Loker trillions. I'm Joe Webber and.

I'm Eric Balchernas.

Eric, you sent a note that caught my attention because you were like, it's the wave of the future. Manufactured high yield gonna be a big category. I was like, that's like Eric Balchina's at his finest. Let's unpack those three. The category a new one Auto callables. Yeah.

I honestly I'd heard the word a couple of times, didn't know what it meant. This is part of a bigger theme that we call yield three point zero where manufactured yield. We used to use the meme of the breaking bad where using the lab making the meth. They are making yield that isn't from like bonds or stoughts. They're just making it and it's very popular, especially if it's a big yield.

So auto callibles are.

One of the latest areas that has a big yield, usually thirteen fourteen percent at least in the colum most etf that I looked at, And there is a huge demand for this. People love income. I've been to the Money Show several times, especially older people. They just go crazy for income. So these products are quite complicated. In my opinion. I used to say VIX and China were the two most complicated areas of ETFs. This is more complicated.

We're gonna try, but we can't.

End this podcast until we both understand it. I think I get it, but I get it on a very superficial level that I just learned it quickly for the note, but I really want to get it, and also want to make sure that people are aware of like the pros and cons of these, because Joel, they're going to grow. This thing came out. This calumost One already has four hundred million, and for something complex to come out, it's

Now I'm surrounded by papers trying to make sense of this, it's kind of hilarious.

Uh I don't think I understand it.

So I'll be the litmus test and to help us make sense of this, we're gonna be joined by Matt Kaufman Global ahead of ETFs at Klamos Investments First market or this year with a UTF in this space, this time my trillions auto callibles.

Matt, welcome jillions.

Joel, thanks for having me. Great to be here.

How does this stuff work?

We are going to hopefully get off of the meth analogy. Yeah, that was We'll move toward first step something.

Listen, Matt, Matt goes to work every day in like this white suit. Then he's in there testing different things. Yes, that was the hollow costing this year, so you might as well.

You already have ramid lab.

But Colam Moos came out with a ticker ce ai E. That's the ticker if you want to look into this more.

That is the ticker Auto Callable Income ETF. So let's take our minds from the equity markets and move it toward the fixed income market. So think like a bond that will pay you a monthly income and return your principle. As long as the equity markets don't fall too far. If you can understand that, you can understand an auto callable. So it's a lot like a bond that pays a monthly income and delivers your principle back to you either at maturity or if you're called away early. That is

That was a really great way of breaking it down. It's also a quote that you had in the story Waltree Cream's more auto callables into ETFs and race for yield by our colleagues at Bloomberg News.

Yes, Matt, though I got that part. Where does the yield come from? The income? Where am I getting? Where are you getting that income to give it to me from?

Yeah, great question. I think one of the easiest ways to think about this is to you know, normally you would frame it around a covered call so that covered call space, as Eric was talking about, is a massive market. It's one hundred and fifty billion dollar market. I was fortunate enough to be at Power Shares in early two thousands. We built the first buy right ETF in two thousand and seven. I think it was a little before it's time.

What he just said, and he goes, that's it. You come on, dude, it's okay.

You want it simple. So we're starting simple.

I'm gonna break this down. Okay, I have ten thousand dollars. I give you ten thousand dollars to this. So first of all, who makes the auto callable? Like is it a bank? And this is like what like a swap contract or? Like whom I am I doing? It's just like Michael Burry where I'm walking into Goldman and I say I have this idea and the bank just says, okay, I'll make a thing for you. Is that what we're doing here?

Yeah.

So you can't go to the market and you can't go to the listed options market and find an auto callable yield, you know, option that does not exist. You can go to the listed options markets and do put writing strategies, you can call writing strategies. But what we've done is we've partnered with JP Morgan. There you go, biggest bank in the world. So yes, it is a bank strategy. You cannot do this with listed options. So

On, hold on. What is JP Morgan's auto callable pricing methodology? So the first of all, what is the index that were based? What's the equity index?

Sure, so let me let me explain this to you in a way that we can we can understand. So, you know, you talked about you know what happens if you have ten thousand dollars. So I brought monopoly money, you did I did. Yeah, I actually brought monopoly money here before, so we can we can play with this. So here, Eric, I'll give you one hundred dollars monopolyous.

He just gave you a hundred back.

It's easy. He would be a bad banker, and it's easier to think about that because it's a Let's let's pretend like that hundred dollars is the par amount.

Okay, Okay, So.

By the way, I get nothing. I don't like this game.

You're going to be the Joel. You're going to be the market. You're going to go to the market here, all right, So Eric's gonna buy an auto callable. Note, I'll be the bank. So you're going to invest in an auto call but note, so give me your hundred oct here's sliding it across the table. Okay, now that's.

Stuck in the middle. I'm moving it across.

Let's put it.

We don't want it in free parking.

Sure, So let's put some terms to this note. Let's say it has a five year life, it has a sixty percent principal coupon barrier. So we're gonna pay you monthly income as long as an equity index does not fall by forty.

Percent during what time period?

Every month?

It's a monthly look, so if the S and P. Let's say it's the SMP index. If it doesn't fall forty percent a month.

In a month while a starting date, so then I get a little a little something. Yeah, that's right, and then there's so and then there's the same thing at maturity. So let's just play this out.

But hold on, does the forty percent restart in the second month. Uh, it's from the starting point we're starting for interception. And let's say the first month the SMP is down two percent. I get I get paid.

So Joel, Joel gets to decided he's going to be the market here. Okay, okay, So let's say this pays twelve percent annualized income every month. So I've got you one hundred dollars safe here. So Joel, let's go thirty days in the future. What is the market going to do? Pick a number up or down?

Right?

This year, I'm gonna say, if we're if we're playing this from the beginning of the year, market gove up.

Okay, let's say you're up five percent. So market's of five percent in a month, Eric, you get a dollar you're good.

You're good.

Okay. Next month, let's say the market.

Well it happened, okay, kind kind of was a little chaotic.

Okay, let's say it happens.

Let's say market went down.

Market goes down how much? Ten percent? All right, Eric, you still get a dollar. Market's down ten. It's not down forty, it's down ten.

It resets every month.

Uh, it's not, it's it's from the inception of the note to that month.

I see.

So because it went up and down. Now year to date, what do we down six percent or something?

We were up five, Now we're down ten, So down five so far? Yeah.

Right, So let's let's just keep playing out. Let's say the market is down forty percent the next month from inception no dollar for you.

Hold on, stop real quick. So we're down five percent, so the market would have to go down like another thirty five percent. Then, so it hits forty percent year to date. Correct that month, I don't get a dollar.

That's correct.

And then because this got called in other.

Words, the whole getting called yet.

Oh okay, so don't get a dollar.

Correct.

Now the next month it goes up five percent.

Your dollar kicks back in.

I get another dollar, You get a dollar. Okay, what if it goes down another twenty percent from.

The forty then you do not get your dollar, gotcha?

Yes?

So in other words, as long as it doesn't come above the forty percent watermark, I get no dollars. If it comes up above the forty percent of water mark, I start.

Getting my dollars again, exactly.

And the one hundred you just hold on to.

Who How is this a good deal for JP Morgan?

Uh?

It seems a little too good, Like I feel like the number should be ten percent. That'd be fair for JP Morgan.

Sure, No, that's a good question. So let's keep playing this out. So now you've got your hundred dollars still here.

Yep.

So five years from now, let's say the market is down twenty percent, you are maturing at par. You get your hundred dollars back. If the market is down forty percent or more, that's when you have principle at risk. So let's say the market is down forty percent five years from now. If I can make the sound in the in the mic, we're gonna tear your one hundred dollars bill by forty percent. You're gonna get sixty percent of your principle back. Oh, that is the risk that you're taking on.

But he's collected income along the way. Correct if if it.

So after five years, if I collected a dollar every month minus say like five months, that would be fifty five dollars against my sixty forty percent that I lost. So it would cush it in a little bit. That's like a cover call. Okay, yes, exactly.

Okay, So that's how a single auto call of works. The call feature then would be if the market is positive, usually after a non call period like one year, then you are called away. JP gets the money back, your prince, you get your principal, you get your hundred dollars back, you get your final coupon payment. Good job shows over, everyone goes home, you have to go buy a new note.

That's how it works.

Wait, wait, that's that's when it gets called. I thought it got called if it goes down too much, No one goes up. Correct, So so when does it get called again?

Yeah, so you're getting called when the market is positive after a one year nine all period.

So if the market's up seven percent after like the market is up this year, it's up fourteen percent, so let's just say correct the year under. Now we're up fourteen percent in twenty twenty five, and therefore I would get the one hundred dollars back correct, and then I would have my twelve dollars because it every went down below forty exactly, so I would have So at that point the fund would automatically reinvest in.

A new auto callable. That's correct.

So now in that getting on the hundred dollars back, big reset, Well right now, a loss of money in that one hundred dollars getting called.

Back or not?

Those resets correct and you you reset it automatically.

Well, so I'm teaching you about an auto callable, so we know how the auto callable works.

Now.

So what we have done with CIE is we've laddered exposure to fifty two or more of these. It's a weekly ladder, a laddered portfolio of auto callables. So now at week fifty three, if the market's down, you might lose coupon on one, I say, but you have fifty one others in the portfolio. So it's highly diversified.

Wow, And the answer is in reality, in this fun CIAE, it is forty percent. That's the number. You don't want the market to go down below.

For a severe and sustained time period.

That's correct, Like, what's that mean?

So we built all of this with JP Morgan and Mercube, a custom indexing provider, and this is all built inside of an index that we trade on swap with JP Morgan. So the risk would be a severe sustained market decline that never recovers, and that in five years your autocollables start to mature below the barrier.

Let's back test it.

What happened, What happens at the if March twenty twenty happens, we're back in the pandemic.

Yeah, use one hundred dollars, put one hundred dollars in. Let's say I get Let's say for a year it's fine, so I got twelve dollars back, but then this next year it's like a twenty Let's say it's a two thousand and eight where the market, well, the market wasn't even down forty percent. It was down thirty three percent, thirty five percent in two thousand and eight, right, So way it's down forty five percent that year, Yeah, and it stays down. What happens?

So, because this is an index. We can look at that history. We go back to two thousand and five, and you would have lost on two point eight percent of those autocollables. Historically, it would have equated to a seventeen percent principle impairment. That was the only time you would have lost money. Again, you did not lose that forty percent.

So you don't lose everything. You lost seventy percent, So you basically you bet a seventeen percent loss on something that's almost not never gonna happen because the Fed's going to step in and start buying assets if a go that low again.

Probably I think you're right.

That's why I don't get I look, it's in this for JP Morgan.

Yeah, this sounds like genius from your point of view, But it feels like JP Morgan is pretty smart, Like we had them on, they're pretty smart people. I feel like they could almost get you to do this deal at like fifteen percent. What do you mean, like if if the market goes down below fifteen percent, that's the threshold, Like going down forty seems like almost like beyond a

Sure, I think when you're trying to build something with risk management, you know, Calamos is a risk manager who's been doing this for nearly fifty years. We want to give people the risk managed exposure. We want to give them a high stable tax efficient income. If there is a payoff that we are after, it's that it's high

Just jpen working consider this like issuing a bond on their port, where it's a high yield bond, but with this tail risk possibility. Therefore, that's why they're giving you a higher yield.

Well, they're issuing the auto callables, so they're the issuer of the auto callables, so they're going to take a spread on that note. They're going to make money on the on the swap that we're trading, so we trade so for plus ten basis points. It's much more efficient for JP Morgan to trade swap with us than it is for somebody to go buy a note from JP Morgan, where you tie up all of their balance sheet, tie

You don't have that whose money is in collateral? Does JPM Moore can get a cut of the interest from the collateral.

No, it's the investor. So we pay JP Morgan SOFA plus ten bases points.

I see.

Okay, They in turn give us the performance of that auto callable index that we've created with Sofa overnight rate, so.

You pay I see. So they get a little interest from you plus ten BIPs correct, and they feel like that's what they get out of it. That's right, and that balances out the income they have to give you. But they also have this like sort of you know, fine print that if it goes down for forty percent, they really wine that's right.

They're taking the other side of the trade.

I feel a little bit like the guy at the craps table that's like, now, I'm gonna just watch that game play out.

What well I mean, I mean here, I'll if you yield is twelve is well, if you get a dollar a month, that's twelve percent, but this is like fourteen percent a little more of a dollar.

The average weighted coop on which is based on that par amount of your note, is fourteen point four percent. Right now. Okay, So the thing that we did not get into yet, which we have to build a base understanding of auto callables. It's a one hundred billion dollar market in the United States. You know, as you alluded to the structured note world, Well, let me back up the cover call space. You know, he said is one hundred and fifty billion dollar market. Derivative income is dominating

And it's never been in an ETF until this show.

We built the first ETF correct.

This is really interesting. You know that when he talks about people wanting income that is derivatives based. If you look at all the flows into income ETFs that would be equity, including which we've talked about before, that could be divid in ETFs which a plane vanilla or these derivative yield three point zero, over eighty percent goes into the derivative ones, which again would include the covered call.

You were talking about since the CTF has come out.

I'm talking about this year, so this is TF came out after this year. So like the thing is to me, I'm going to put this into a category with JEPY. This is a little more complex than JEPY, but the covered call space is huge now.

But I might push back on you a little bit if you look at equity premium income strategies. You know, again another JP Morgan, you know tide product, but JEPI and JEFQ will hold actual equity linked notes and then deliver you know, that income which is somewhat tax inefficient, but you don't really know what's going on side those notes. Like you, you have to look at what they're publishing, which a lot of times they do it late and so there's there's not a lot of transparency all those.

To be fair to them, though, in the yield that you get like that we display on the des is pretty good. I mean, I think what's like nine ten percent? And I think to some degree, like some of these products I've seen over the years, you just either trust the issue or you don't because correct a lot of advisors, they're not going to get what you're selling, they're gonna say, Matt, I trust you, You're a good guy. Calamos has a reputation.

So who who was doing it before the ETF going to a bank and saying I want.

That autocullable, autocullable thing that you guys have told me about.

And then how is that changing now that it's you know, potentially retail friendly.

You mentioned the buffer at ETF, so I had a hand in building though, so if you trust the bus buffer ETF SO, those have been working phenomenally for nearly a decade. It's a very big space. Now that model is very commoditized. Everybody who builds buffers tends to do it closely the same way, So yeah, if you understand that space or that was something that was mildly confusing. Back then, people had to get their heads around it. It was new. Now it's not. Most people understand it.

So his ten thousand spits out this income for the duration and then you give up whatever the market gains.

But you're going to get your principle back.

That's correct.

And at what percentage of the time do you get your principle back when you did this.

If you look historically, it would have been ninety seven point two percent of the time for our our US large cat version. We're launching a NASDAK version that historically had never breached principle. Yeah, so I know, I know what you're saying. It sounds too good to be true. So the piece that we have not unlocked yet now that we know understand auto calls is the reference index. So if you just tied this to the S and

But what happens in those moments where the volatility spikes.

Then your VALL will come down in the VALL target. So you mentioned twenty twenty, so I put that on pause for a reason. So in twenty twenty, what was equity market volatility sixty seventy percent, So you're at thirty five. So in that environment you're defending the barrier. Not only do you now have a forty percent barrier, but it's even more powerful because your VALL is at thirty five while the SMP is at seventy.

But in twenty twenty.

Only that was like when Eric's quite it that long, He's like, it's like next level, We've done it.

We have never made Eric Roy too like.

A physics conversation you can have in like our podcast.

This is.

I mean, we're about to get into black holes and like dark matters.

No, no, no, black shoals, not black holes.

But in twenty twenty, you still got your thing. You still got the there was no call. It didn't get called.

Over the last ten years, you would have gotten every single coupon and you never would have breached barrier.

So I think this is something When you go talk to advisors and people about this, it sounds like you're gonna get interest. But I'm assuming they put like two percent to.

Three percent of the portfolio.

Wouldn't go too crazy and where do you put it? What do you ad this?

This has equity market like volatility. So think of fifty two auto callables like rubber bands that will trade at par. And as the market goes down, the rubber bands will start to stretch. You'll trade at a discount to par. And as long as they don't break, then you're going to snap back to par. Those rubber bands will go back to par. So we want to make sure that

So if the markets go down, say twenty percent, and you're seeing a discount in these, there's a certain kind of trader who may think that's the braid yeah, Versus in the flip side, if the market keeps going up, a trader may be like, you know what, let me not buy that right now because it's looking a little pricey. I get it.

I mean we have so let me.

Ask you this. Are these used mostly by buy and hold with a little traders if it gets into a discount, like what's the buy and hold trader ratio here for something like this?

It's both early adopters. There's more than ten thousand shareholders in KAI right now. Let's what we're calling ci E KAI. A lot of them are financial advisors who use auto callable notes. They said, we've been using these for decades. We get called away after you know, six months to a year, we have to go buy a new note of all changes on us. The parameters are different, might not be able to get the same terms. I've got a hundred of these things on the books, one for

Where does he live?

He's out West.

Yeah, that's it. That's a long flight. Yeah, well this is the this is what ETFs do, drool. They take complicated, messy, institutional type stuff and they just make it simple, fast, good cheap.

Okay, so fast, good cheap. How do you what color of uh light do you give this?

We have what we do.

I don't believe if we.

Could dress this one yet, I think, hold on, hold on, what do you give?

What do you give? Covered? Call ETFs? What light do they get?

I gotta look. I believe they're green. They might get dinged once for using derivatives. Okay, so maybe you'd be the same green, but one little note for like the fact that it uses derivatives. But I guess that's it. I mean there's no leverage thet there's no rolling of commodities, and there's no hidden fees. Correct, those would be the things we ding them. But I'd have to look deeper. But I would to me, these feel you know, between PG and PG thirteen somewhere.

So the risk really is I'm not going to get my principal back if there's some you know, real big downturn, or I'm going to give up some upside.

Yeah, your risk is largely to the other side.

Here's what I.

Don't get like, if I'm in the VU, right, I'm a SAP five hundred, and I get Oh, I know why you don't get the return of the index.

You just get the Yeah. Yeah, the principle just comes back. Yeah.

So in the end, VU could be up twenty percent that would outperform this. This is more like just getting a little income based on VU not going down a super amount, which I feel like is a sort of the words. This would be kind of a little less risky than VU in a way.

At times it could be forget volatility. Yeah, if you're looking for income, yeah, or if you don't think the market's going up fourteen and a half percent next year, then this would be a way to essentially lock that in as long as you're not going to fall by that barrier.

So maybe instead of buying a.

Rental property real estate property like this, this is in that category if you're thinking about it from like what a financial advisor would tell a client.

Yeah, that's an interesting here.

It is. It's a rental property in Florida. But you've got to pray there's nothing once everything in your hurricane. That's what it is.

It is your God kind of like that. Yeah, so let's pretend like you are the insurer and you are collecting premiums from people all over the country.

It was way more fun when we were doing it a way.

I'm an insured I think we nailed it, and that's I don't think you're can improve on it though.

No, I say, if you're an insurer, you're collecting premiums, maybe there's a storm in Florida, but everyone else is still paying you.

Yeah, but aren't you doing these fifty or so all are on equity indexes, right, I mean one of them.

Insures got out of not but there's fifty starting in the starting You're right, I say, Oh, I say, okay, so it's like all over the country, but there's one hurricane in Miami.

Okay.

Correct. You're diversified by time instead of geography.

That's a lot of work. Yeah, Like do you have like associates that like do all this like keep up Kai take like an army of people like putting these new notes on like just seems like a lot of effort.

The beauty of KAI is that it's all swap based. So we built everything.

JP Morgan is the rest. It's all in them.

Well, we built everything inside that Mercube index. And so Mercube, Yeah.

That sounds like like matrix or something that sounds like what's that sounds too much? Merkcube? Who is that somebody's last name?

Mercube is an indexing provider that was ok yeah, founded by the former head of custom indexing at S.

And P the Mercube theory.

Okay, so you're not alone anymore?

Right?

You got Kai was out there first. Yeah, you got some competition. What does the competition look like?

Can I backup for thirty seconds? And we're going to spend a while on this. So on the ETF side, the last point here, because we did this index based it trades extremely tight. We don't have to post Greeks to the website. There's not a lot of active management here. So we take this index by Greeks.

By the way, Ajoul, he doesn't mean Athnosios. He means like formulas like Vega, Gamma, Kalamos. He's picturing Athnosios and John Stamos on your website and.

That's not true, that's right. Not yet. We do have Yanis though. Yeah, yeah, so where was I We take that index, We give that price almost like an intra day nave to the market makers, so they are very tight to that index level. JP Morgan is trading swap on the index. It is trading at one to three cents wide every day, and that's largely because of that index. So it's extremely operationally light.

Okay, now my question, yes, oh yes, you were first. Now there's some competition. Yes, how do you feel about the competition?

I think it's great. Competition is good for the market. It's going to grow. We're not going to raise you know, one hundred billion dollars all by ourselves. I hope we do, but I know it's going to be because a rising tide is lifting all boats. If there's an encouragement, I hope that it's done correctly. The covered call space took fifteen twenty years to grow and then become more risky.

Oh yeah, because somebody filed for single stock auto call Yeah you too. I see so that well, let's go I know you don't do those, but like let's say you're doing Navidia. Let's say you did Navidia single stock auto call Well, what would.

The barrier be?

You think, Well, the volatility would be you know, fairly high higher, but it comes at it.

Could the barrier be sixty?

It depends. You know, you can pull those levers and change your coupon.

So what you're worried about is somebody going for the jacked up yield with a lower barrier and people being like not understanding the auto callable. Correct, yeah, and then it changed the whole camera and you know the industry is going to do this and you and they like to push the envelope.

Oh for sure, for sure and you and we've seen this in Korea. We've seen this in other markets where folks these are big. In South Korea, I extremely they love risk, they love risk.

Going theo is it's a gen per capita in South Korea is like off the charts.

The the Calamost strategy is we're just going to go to indexes S and P five hundred.

Yeah, let's build an index that is customized for auto callables to give you the best chance of getting a high, stable, tax efficient coupon.

By the way, has have you talked to Bruce Bond regularly?

I have you talked to him in about this strategy?

Yeah?

I feel like he's an eye in this. I don't know, I just feel like this is Bruce bondish.

Oh that's funny. You know Innovator brought out were First Trust.

I feel like they might just.

Like, so we all filed around the same time. Okay, Innovator brought out some single stock products. I don't know how well those that have done, like you do the research on that, and then the other competitors have not come to market yet. There's about four or five in the market. So you know why you probably feel that way.

Is because you guys all live in the same town and what and Illinois?

Wow, this is true?

Like by the way, in Wheaton, like where he lives, he has like a cul de sac. His next door neighbor is Innovator and this other nextraor neighbor is First Trust and all their kids are friends. But they hate each other at work?

Is that true?

Something like that hate each other?

Okay, all right, but just confront of me, are you on the same kids baseball teams.

It is a small town, and well, we have seven kids, so there's a good chance that we're on everybody's baseball team.

All right, you have seven kids. We do? Wow? Yeah, we do.

Oh my god, that's going. Wow, that must be you're wow. You look pretty good for seven kids.

I don't sit down. You just got to keep keep on going.

Yeah.

Yeah, that's your exercise, I guess. But I think the reason amazing.

I think the reason you are thinking that way is, you know, the buffers at the time replicated the largest structured note market, and in a zero rate environment, buffers were the king. When rates rose to five percent, what are people doing. They're buying fixed indexinuities. They're buying capital protected notes. So that was what we brought at Calamos, one hundred percent protected products. I helped Bruce build innovator when I was at Milliman. I was there for twelve years.

Yeah, No, he Matt comes from that world. This is organic to because I've known him for quite a while and his work on the early days of the target outcome, having worked in an options industry. But what you will find is a lot of the issuers who don't normally

Yeah, and I'm at that special table just watching it happen.

I know now you now you can just get the for twenty five dollars that can be Let me ask you this, you have seven kids, you have other film members. Would you feel safe putting your own family in here? Is this more for a sophisticated investor?

No, I would what we've done here, you know, going all the way back to the beginning, if you tie all of your money or tie your money to a single auto callable, you have single point coupon risk, single point maturity risk where you can lose forty percent or more of your money when you ladder that out fifty two or more times and do it weekly. Now you've

Best time we talked about this space, boomer candy was the phrase that came out of your mouth.

Is this boomer candy?

Yeah, I mean I think so, because it's a way to participate boomer's love income. But then again, sort of the gen z ers too, So I would say the only thing that doesn't make this boomer candy is that there isn't a protection element. I mean, you're betting the market won't get on forty percent, and that actual income can be a buffer if it does go down. But I think, I don't know. It might be like half boomer candy. I consider boomer candy something that helps you sleep at night and cures anxiety.

This is angiin boom boomer candy.

Maybe, or I don't know, it's just it's ancillary, but I could see this appealing, especially we like guy from Texas who's a YouTube star. I could see the other younger investors actually getting into this because it does have you know, that's a pretty big yield. I mean, that's going to excite some people. Although some of the yield max field like eighty to one hundred percent. But with those, you're giving up so much much total return.

What makes me nervous with those? Well, so you, if I remember correctly, you came up with the boomer candy term after we launched the one hundred percent protected ETFs.

Yeah, well it was that I camera when I camp with it, but it was that it was the buffers combined with the cover calls. Yes, those are both. I don't know.

They just feel it as a specific protection amount. Yes, here you're taking diet market correct. Here you're taking on tail risks. So there's a chance some of those coupons.

That's why it's a little.

Bit I would agree with you. You got to be comfortable with equity market like volatility, the single stock covered call ETFs as a risk manager, you know, coming from an actuarial consulting firm, not something we would build Calamos. As a forty five year old risk manager, we would not build those. But the yield that those are stating is not a yield that you will likely get.

You know.

It's if it's a daily by ride or a weekly by right, they'll take that number that they've collected and they'll annualize it. So if it's a daily buy right and the market's volatile, I'm going to get a good coupon today and now times that by two hundred and fifty two trading days, and it looks like this massive number. The odds of you actually achieving that are next to zero.

All right, Matt, I have one final question for you, which is what is your favorite ETF ticker other than any of your own.

Oh that's a good question. A Power Shares product. I don't work there anymore. We launched food and Beverage ETF. Eric, do you remember the ticker PBJ.

Here you go, Yes, that is a good one. Yeah, no one's ever picked it.

And it really PBJ protein beverage, I know, healthy fads.

Yeah, nice kicker, that's a good one PBJ.

Matt Koffman, thanks so much for joining us on trillions.

Thanks for having me.

Thanks for listening to Trillions until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, or wherever you'd like to listen. We'd love to hear from you. Hit us up on social I'm at Joel Weber Show, He's at Eric Balcino's. Trillions is produced by Magnus Hendrickson. Sage Bauman is the head of Bloomberg Podcast