First Trust's Buffer ETFs are among the fastest growing in the Target Outcome/defined outcome space, with over $1.5B in total net assets for the product line as of 10/31/2020. As a result, the funds may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers. First Trust believes a buffer against a level of losses can help investors stay invested during volatile times. Information about your device and internet connection, including your IP address, Browsing and search activity while using Verizon Media websites and apps. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. Let’s say you bought the Innovator S&P 500 Power Buffer ETF – January (PJAN) At the beginning of the year and held it through the recent market drawdown. The FLEX Options held by the funds will be exercisable at the strike price only on their expiration date. The funds currently have fewer assets than larger funds, and like other relatively new funds, large inflows and outflows may impact the funds' market exposure for limited periods of time. Shares may be sold throughout the day on the exchange through any brokerage account. For more information about First Trust, please contact Ryan Issakainen at (630) 765-8689 or RIssakainen@FTAdvisors.com. The net cap includes the unitary management fee of 0.85% and any other fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the funds’ management fee. Market Price returns are based on the midpoint of the bid/ask spread on the stock exchange on which shares of the fund are listed for trading as of the time that the fund's NAV is calculated. FLEX options give the buyer the write, but not the obligation, to buy or sell a security or an index at a set price at a future point in time. (So if the market closes down 20% for the year, you’ll be down 5%). Sign up to receive our updates and other TMCnet news! ETFs offer investors the potential advantages of low operating costs and improved tax efficiency over traditional, actively-managed mutual funds. Usually, this would be prohibitively expensive, so to fund buying the puts, the fund *sells* puts further down. WHEATON, Ill.--(BUSINESS WIRE)--Please replace the release with the following corrected version due to multiple revisions in first table. So if they purchased puts with a strike price of $100, they might sell puts at a strike price of $90. If the funds’ authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a discount to the funds’ net asset value and possibly face delisting. The use of options and other derivatives can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives. First Trust’s Buffer ETFs are among the fastest growing in the Target Outcome/defined outcome space, with over $1.5B in total net assets for the product line as of 10/31/2020. New outcome period values for the November Series of the Target Outcome ETFs®: If an investor purchases shares after the first day of the Target Outcome Period, they will likely have a different return potential than an investor who purchased shares at the start of the Target Outcome Period and the buffer the funds seek may not be available. At the core, each of the offerings in the market place uses options to give you: That downside protection isn’t free — you pay for it by accepting some level of a cap on your potential upside. Below is a recap of the outcome period values for the November Series of the Target Outcome ETFs®: DNOV and FNOV are managed by Cboe Vest, the creator of Target Outcome Investments and manager of the longest running buffer strategy fund. If the funds' authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a discount to the funds' net asset value and possibly face delisting. Instead of just selling a bunch of your risk assets and hoarding cash, you can forgo some upside to get some insurance. The funds may, under certain circumstances, effect a significant portion of creations and redemptions for cash rather than in-kind securities. Each fund's buffer will remain unchanged in the new Target Outcome Period. While they’re uniqueness (and the legitimate work it takes to manage and trade them) may justify that for now, I suspect that just as we’ve seen in the rest of the ETF market, the competition will only make them cheaper and better for investors. If the market had stayed flat all year from February, your position would slowly have risen to that 5% (because it’s below the cap). Importantly, these kinds of calls tend to be very cheap, because you’re only getting the price return (it’s presumed that whoever is writing the calls owns the stocks, and still collects those dividends, even if the stocks get called away when the option expires). 5 Inception date for FNOV and DNOV is 11/15/2019. First Trust and FTP are based in Wheaton, Illinois. To enable Verizon Media and our partners to process your personal data select 'I agree', or select 'Manage settings' for more information and to manage your choices. The funds may invest in FLEX Options that reference an ETF, which subjects the funds to certain of the risks of owning shares of an ETF as well as the types of instruments in which the reference ETF invests. “DNOV and FNOV represent our extensive leadership and best practices in Buffer Fund design and portfolio management, such as the utilization of SPY options,” said Karan Sood, CEO of Cboe Vest.