Bitcoin Without The Whiplash? Calamos Unveils Risk-Mitigated CBOJ ETF

When it comes to paradigm-shattering investments, few publicly traded assets can match the potential of Bitcoin BTC/USD. This simple but powerful reality offers intrigue for financial service provider Calamos' upcoming exchange-traded fund uniquely focused on BTC.

By now, arguably, every active investor will be familiar with the growth trajectory of Bitcoin. As Benzinga's Chris Katje noted in November last year, investing $1 in BTC back when the blockchain asset was first introduced would have been worth nearly $109 million at the time of writing.

Once the exclusive domain of a select few proponents, Bitcoin and the broader cryptocurrency ecosystem have radically altered the financial and even geopolitical narrative. Increasingly, young investors – particularly those who came of age during the advent of the internet – are directing their portfolios to decentralized digital assets. All evidence indicates the trend could accelerate with future generations of workers.

On a much wider scale, nations like El Salvador have enthusiastically embraced cryptos, thus normalizing what was once considered a highly speculative investment category. Even more influentially, Bitcoin represented a key talking point throughout the 2024 presidential election. With President Donald Trump seemingly set to prioritize the establishment of a national BTC reserve, the future for virtual currencies appears brighter than ever.

However, Bitcoin can't ignore a critical weakness: extreme volatility.

While the media celebrated Bitcoin's ascension above the $100,000 milestone unit price, it has previously criticized the wild volatility. Respected publications have warned about the shifts from rags to riches back to rags, often occurring within a matter of weeks. A Yale Law School paper once broadcasted the so-called "death" of cryptos.

But what if an investment vehicle could provide the growth of Bitcoin while controlling for the risks over specific outcome periods? This best-of-both-worlds-approach symbolizes the main ethos undergirding Calamos' upcoming BTC-centric product.

Capitalizing On Bitcoin's Potential While Controlling For The Pitfalls

Undeniably, what has aided Bitcoin's ascension is its rawness. Unfettered by traditional protocols, Bitcoin and other cryptos traded freely in global exchanges, without regard to calendars, customs or cultures. However, the frontier nature of the blockchain also sparked considerable wildness and unpredictability.

With Calamos' soon-to-be launched ETF product, the financial services provider offers a novel approach to cryptos. As a global investment firm with over $40 billion in assets under management and trusted by over 41,000 intermediaries, Calamos has made its name within the risk management industry. It also focuses on delivering groundbreaking innovations, a heritage that this ETF product seeks to uphold.

Called the Calamos Bitcoin Structured Alt Protection ETF, the fund – which will feature the ticker symbol CBOJ and be listed on the Chicago Board Options Exchange (CBOE) – will be the world's first 100% downside protected Bitcoin ETF.

"Many investors have been hesitant to invest in Bitcoin due to its epic volatility," stated Matt Kaufman, Head of ETFs at Calamos. In response, the investment firm "seeks to meet advisor, institutional and investor demands for solutions that capture bitcoin's growth potential while mitigating the historically high volatility and drawdowns of this fast-growing and high performing asset."

By leveraging a combination of government-backed bonds and financial derivatives, this actively managed fund will provide a regulated mechanism to access the namesake digital asset within a risk-controlled framework. Furthermore, Calamos' website notes that "CBOJ resets annually, offering investors a new upside cap with refreshed protection against negative bitcoin returns over the subsequent 12-month period."

With units of the fund facilitating an indefinite holding period, the CBOJ ETF could be the new solution for crypto-focused growth initiatives.

How Does 100% Downside Protection Work?

The cornerstone of the Calamos Bitcoin Structured Alt Protection ETF lies in its structured design, which prioritizes preserving investor capital while maintaining exposure to Bitcoin's growth potential. The promise of “100% downside protection” isn't a guarantee in the absolute sense but a carefully engineered safeguard against negative returns over a defined outcome period – in this case, 12 months.

At its core, the fund achieves this through a combination of U.S. Treasuries and exchange-listed options tied to the CBOE Bitcoin US ETF Index. Treasuries, considered among the safest financial instruments globally, anchor the fund's principal, providing a baseline of stability. Meanwhile, options – specifically FLEX (Flexible Exchange) options – are deployed to create the protection layer. These options allow the fund to manage Bitcoin's notoriously volatile price swings, offsetting potential losses in a downturn.

This mechanism works within a defined outcome period, meaning that the protection applies if shares are held through the entire 12-month cycle. At the start of each year, the fund sets an upside cap, which limits the maximum potential return investors can achieve. While this tradeoff may seem restrictive, it ensures that even in the event of severe market corrections, the investor's principal is preserved.

For many investors, this structure represents a monumental leap forward. Traditionally, exposure to Bitcoin has come with a binary risk – potentially massive gains or significant losses. By creating a middle ground, CBOJ transforms Bitcoin from a speculative gamble into a more palatable option for risk-averse individuals and institutions alike.

By offering a vehicle that tempers Bitcoin's volatility while offering its upside potential, Calamos is opening the door to a broader class of investors – those who value growth opportunities but refuse to compromise on capital protection. CBOJ, in this sense, is more than an ETF – it's a potential bridge to mainstream crypto adoption.

A New Era For Bitcoin Investing?

Bitcoin's rise to prominence as a revolutionary asset class is undeniable, but its volatility remains a significant hurdle for many investors. With the CBOJ ETF, Calamos offers a bold solution – the potential for Bitcoin's growth with a structured approach to managing its risks.

By combining 100% downside protection during defined periods with carefully engineered upside opportunities, the fund seeks to deliver the best of both worlds: exposure to Bitcoin's future with a safeguard against its unpredictability. For investors seeking a balanced entry into cryptocurrency, CBOJ could be worth looking into.

Featured photo by Eivind Pedersen on Pixabay.

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Cap rate and ranges are shown gross of management fees.​

*Cap rates and ranges are shown gross of management fees. Initial cap rates shown are calculated on the business day prior to fund launch.​

Estimated cap range are estimates based on the last 15 trading days prior to range announcement, based on market conditions during the sample period and are subject to change. The actual cap rate may be different based on market events.​

The information in each fund's prospectus and statement of addition- al information) is not complete and may be changed. We may not sell the securities of any fund until such fund's registration statement filed with the Securities and Exchange Commission is effective. Each fund's prospectus and statement of additional information is not an offer to​ sell such fund's securities and is not soliciting an offer to buy such fund's securities in any state where the offer or sale is not permitted.​

Each of CBOJ, CBOA, CBOY and CBOO seeks to provide investment re- sults that, before taking fees and expenses into account, track the positive price return of the CME CF Bitcoin Reference Rate – New York Variant ("BRRNY") ("Spot bitcoin") up to a predetermined upside cap (the "Cap") while seeking to protect against 100% of losses (before fees and expenses) of (i) Spot bitcoin or (ii) one or more of the Underlying ETPs and/or Bitcoin Indexes, in each case, over a period of approximately one (1) year (the "100% Protection 1 Year Outcome Period"). ​

Each of CBSJ and CBSY seeks to provide investment results that, before taking fees and expenses into account, track the positive price return of Spot bitcoin up to a Cap while seeking to protect against 100% of Spot bitcoin losses (before fees and expenses) over a period of approximately six months. Each of CBXJ, CBXA, CBXY and CBXO seeks to provide investment results that, before taking fees and expenses into account, track the positive price return of Spot bitcoin up to a Cap while seeking to provide a floor with protection to a maximum loss of 10% of the negative price return of Spot bitcoin (before fees and expenses) over a period of approximately one year (the "90% Protection Outcome Period"). Each of CBTJ, CBTA, CBTY and CBTO seeks to provide investment results that, before taking fees and expenses into account, track the positive price return of Spot bitcoin up to a Cap while seeking to provide a floor with protection to a maximum loss of 20% of the negative price return of Spot bitcoin (before fees and expenses) over a period of approximately one year (the "80% Protection Outcome Period" and collectively with the 100% Protection 1 Year Outcome Period, and 90% Protection Outcome Period, each an "Outcome Period").​

The Funds will not invest directly in bitcoin. Instead, the Funds seeks to provide investment results that, before taking fees and expenses into ac- count, track the positive price return of Spot bitcoin by investing in options that reference the price performance of either (i) one or more underlying exchange-traded products ("Underlying ETPs") which, in turn, own bitcoin or (ii) one or more indexes that are designed to track the price of bitcoin ("Bitcoin Index").​

A Fund's Target Outcome may not be achieved, and investors may lose some or all of their money. Each Fund is designed to achieve the Target Outcome only if an investor buys on the first day of the Outcome Period and holds the Fund until the end of the Outcome Period. While each Fund seeks to provide a specified percentage of protection against loss- es experienced by the price of Spot bitcoin for shareholders who hold Fund Shares for an entire Outcome Period, there is no guarantee it will successfully do so. If a Fund's NAV has increased significantly, a share- holder that purchases Fund Shares after the first day of an Outcome Period could lose their entire investment. An investment in a Fund is only appropriate for shareholders willing to bear those losses. There is no guarantee the Capital Protection or Floor, as applicable, and Cap will be successful and a shareholder investing at the beginning of an Outcome Period could also lose their entire investment.​

An investment in a Fund is subject to risks, and you could lose money on your investment in a Fund. There can be no assurance that a Fund will achieve its investment objective. Your investment in a Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in a Fund can increase during times of significant market volatility. Each Fund also has specific principal risks, which are described below. More detailed information regarding these risks can be found in each Fund's prospectus.

Digital Assets Risk: The bitcoin network was first launched in 2009 and bitcoins were the first cryptographic digital assets created to gain global adoption and critical mass. Although the bitcoin network is the most established digital asset network, the bitcoin network and other cryptographic and algorithmic protocols governing the issuance of digital assets represent a new and rapidly evolving industry that is subject to a variety of factors that are difficult to evaluate. Moreover, because digital assets, including bitcoin, have been in existence for a short period of time and are continuing to develop, there may be additional risks in the future that are impossible to predict as of the date of this prospectus. Digital assets represent a new and rapidly evolving industry, and the value of the Underlying ETPs' shares depends on the acceptance of bitcoin. The realization of one or more of the following risks could materially adversely affect the value of the Underlying ETPs' shares.​

Investing involves risks. Loss of principal is possible. The Funds face numerous market trading risks, including authorized participation concentration risk, underlying ETP risk, cap change risk, capital protection risk or floor risk, as applicable, capped upside risk, cash holdings risk, concentration risk, clearing member default risk, correlation risk, costs of buying and selling fund shares, counterparty risk, derivatives risk, equity securities risk, FLEX options risk, interest rate risk, investment in a subsidiary, investment timing risk, liquidity risk, management risk, market maker risk, market risk, new fund risk, non-diversification risk, options risk, OTC options risk, position limits risk, premium-discount risk, secondary market trading risk, sector risk, tax risk, trading issues risk, U.S. Government security risk, U.S. Treasury risk, and valuation risk. For a detailed list of fund risks see the prospectus.​

With respect to each of CBOJ, CBOA, CBOY and CBOO, 100% capital protection is over a one-year period before fees and expenses. With respect to each of each of CBSJ and CBSY, 100% capital protection is over a six month period before fees and expenses. All caps are pre-determined.​

Cap Rate – Maximum percentage return an investor can achieve from an investment in the Fund if held over the Outcome Period. Protection Level – Amount of protection the Fund is designed to achieve over the Days Remaining.​

Outcome Period – Number of days in the Outcome Period​