Innovator Capital Management, the company that launched the first buffer ETF back in 2018, introduced a new class of investment products that seek to produce positive returns in rising or declining markets. The Innovator Equity Dual Directional Buffer ETFs – July Series, launched on Tuesday, are the first ETFs of their kind that aim to potentially provide gains in both rising and declining markets over a one-year outcome period.
The Innovator Equity Dual Directional 10 Buffer ETF – July (BATS:DDTL) and the Innovator Equity Dual Directional 15 Buffer ETF– July (BATS:DDFL) track the performance of the SPDR S&P 500 ETF Trust (NYSE:SPY) and utilize options to construct a specified outcome strategy.
In a rising market, these products aim to match SPY's returns up to a preset cap. In a moderately declining market, they target the inverse of SPY's performance, also subject to a cap. Notably, they include a built-in buffer to limit losses during more severe market downturns.
For example, DDFL is structured such that if SPY drops 15% over the 12-month time frame, the ETF would return +15%, pre-expenses and fees. This is enabled through overlays of options that previously were limited to structured notes—expensive, intricate products historically reserved for institutional buyers.
Also Read: Crash-Proof Investing? New Innovator ETF Promises Downside Buffer
What Makes These ETFs Stand Out
The Dual Directional Buffer ETFs bring together multiple compelling features:
Return potential both ways: Investors can capture gains whether the market rises or experiences moderate declines.
Predefined outcomes: Each ETF comes with an open upside cap, an inverse return cap, and a downside buffer, all of which are established before investment.
ETF structure benefits: Unlike structured products, these ETFs are liquid on a daily basis, transparent in pricing, tax-efficient, and carry no credit risk.
Clarifying the major differences between the two funds, DDTL offers a 10% cushion against market decline and has up to 12.59% potential upside if the market rises. In the event of a market downturn, it can have up to 10% in positive returns, similar to the inverse reaction of SPY within that limit. Conversely, however, DDFL provides a wider 15% buffer and has the potential to return as much as 15% in falling markets, and its upside cap is only slightly lower at 8.79%. Both funds have an expense ratio of 0.79%.
Innovator advises on over $25 billion of assets across more than 150 Defined Outcome ETFs as of May 31. The Dual Directional Buffer ETFs extend that tradition by bringing advanced risk-managed strategies to retail investors.
With volatility being a recurring theme in financial markets, these new ETFs aim to provide investors with something unusual: clarity, control, and the ability to win, regardless of market conditions.
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