One of the interesting tidbits from Nvidia’s (NVDA) recent earnings update was the semiconductor giant’s decision to ratchet up its dividend by 2,400%.
Obviously, that’s massive in percentage terms, but even with that hike, the stock’s dividend yield will only be somewhat in-line with that of the Nasdaq-100 Index (NDX), which yields a paltry 0.43% on a trailing 12-month basis. Good news: advisors and investors can harness elevated income from the Nasdaq without relying on old guard options income ETFs.
Enter the Calamos Nasdaq Autocallable Income ETF (CAIQ). CAIQ, which debuted last November, leverages the autocallabe strategy pioneered by Calamos to deliver clients with a best of both worlds approach. That being a high income profile and downside protection, the latter of which is something to consider at a time when NDX is up 120.3% over the past three years.
CAIQ Refreshes Derivatives Income
Options income ETFs are popular – it’s one of the fastest-growing ETFs segments. However, many of the standard funds in the category leave something to be desired. In exchange for tantalizing yields, end users often forsake upside participation with flimsy or no downside protection.
CAIQ breaks from that pack by using a sophisticated strategy that was previously out of reach for many advisors and retail investors. In simple terms, Calamos autocallable ETFs leverage the firm’s long-standing experience in the convertible bond market to tap into reverse convertibles – fixed income assets linked to equity performance. Data confirm it’s a booming market.
“This innovation marked a turning point—reverse convertibles became the first income-generating structured notes tied to equity market performance rather than traditional fixed-income factors like credit quality or interest rate duration,” according to Calamos. “The appeal was immediate: significantly higher yields without the constraints of credit spreads or interest rate risk. Today, the yield note space has grown into a $100b+ market, with many investors opting for callability features and optimized underlying reference indexes in an effort to generate a differentiated source of income.”
Are there some complexities? Sure, but that speaks to the advantages of letting the actively managed CAIQ perform the autocallabe legwork for clients. Plus, the autocallable concept isn’t as daunting as it appears at first glance.
(Image: Calamos Investments)
“The trade-off is simple: monthly income potential typically greater than traditional fixed income, in exchange for the risk that a severe market downturn could interrupt your coupon payments or, in the worst case, result in principal loss,” adds Calamos.
CAIQ Perks Aplenty
CAIQ is just seven months old and already has nearly $197 million in assets under management – a fine start for any new ETF. Some might say the fund’s 17.32% distribution yield (as of April 30) is the primary driver behind its quick success.
Perhaps it is, but yield alone undersells CAIQ’s advantages, which also include tax efficiencies and versatility.
CAIQ can “replace part of your equity allocation to maintain equity like total return potential while potentially enhancing current income through monthly distributions” and it “may be ideal for taxable accounts with 1099 reporting,” according to the issuer.
For more information on Calamos Autocallable ETFs, visit: www.calamos.com/autocall.
Related: The HALO Trade Now Has Its Own ETF