Innovator Buffer Step-Up Strategy ETF (BSTP)

Overview

The Innovator Buffer Step-Up Strategy ETF seeks to provide exposure to the price return of an equity index, up to a predetermined cap, while buffering investors against a defined downside risk over a one-year period. It focuses on providing a specific level of downside protection and potential upside participation.

Reputation and Reliability

Innovator Capital Management is known for its defined outcome ETFs, aiming for specific risk/return profiles. They are considered reliable in delivering on their stated objectives.

Management Expertise

The management team has expertise in structuring and managing defined outcome ETFs, using options strategies to achieve specific investment objectives.

Goal

To provide investors with exposure to the upside potential of an equity index, up to a cap, while providing a buffer against a specified level of downside risk over a one-year period.

Investment Approach and Strategy

Strategy: The ETF uses a laddered options strategy on an underlying index, to create the buffer and cap. These often reset annually.

Composition The ETF primarily holds FLEX Options referencing the price return of an underlying equity index, such as the S&P 500, alongside a small percentage of cash.

Market Share: Data not readily available to precisely determine market share within defined outcome ETFs.

Total Net Assets (AUM): Data not readily available to precisely determine the total assets under management for Innovator Buffer Step-Up Strategy ETF.

Key Competitors

• FTCS (First Trust Cboe Vest U.S. Equity Buffer ETF - September)
• BUFA (Innovator U.S. Equity Buffer ETF - August)
• PJAN (Innovator U.S. Equity Power Buffer ETF - January)

Competitive Landscape

The defined outcome ETF market is competitive, with several issuers offering buffered or defined return strategies. Innovator is a prominent player, with a wide range of buffer ETFs. Competitors offer similar strategies with varying buffer levels, caps, and underlying indexes. Innovator's first-mover advantage and broad product suite gives it an edge, but success depends on effective management of options and managing costs.

Historical Performance: Historical performance is highly dependent on the underlying index and the specific buffer and cap levels. Data needs to be analyzed for the specific ETF and time period.

Benchmark Comparison: The ETF's performance should be compared to the underlying index without the buffer, as well as to other buffered ETFs with similar risk/return profiles.

Expense Ratio: The fundu2019s expense ratio, including management fees and operational costs is data not readily available.

Average Trading Volume

The ETF's liquidity can be assessed by checking its average daily trading volume, which determines how easily shares can be bought and sold.

Bid-Ask Spread

The bid-ask spread, which measures the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept, provides insight into the cost of trading the ETF.

Market Environment Factors

Equity market performance, interest rates, and volatility levels significantly impact the ETF's performance. Bull markets will lead to capped gains, while bear markets will test the buffer.

Growth Trajectory

Growth trends depend on investor demand for defined outcome strategies and the ETF's ability to consistently deliver its stated objectives. Changes in the options market can affect the strategy and holdings.

Competitive Edge

Innovator's competitive edge lies in its expertise in defined outcome ETFs and its broad range of product offerings. The company has first mover advantage in the defined outcome ETF market. It differentiates itself by offering different levels of downside protection and potential upside participation. The Laddered options strategy it uses to create the buffer and cap is complicated, which can be difficult for competitors to replicate. Investor awareness and understanding of defined outcome ETFs may further benefit Innovator.

Volatility

The ETF's volatility should be lower than the underlying index due to the buffer. However, the capped upside potential limits returns in strong bull markets.

Market Risk

The primary risk is that the underlying index declines more than the buffer provides, resulting in losses. The cap limits potential gains, which can be a risk in a strong bull market.

Ideal Investor Profile

The ideal investor is risk-averse, seeking downside protection while still participating in market upside. Investors who want to limit their potential losses and are comfortable with capped gains may find this ETF appealing.

Market Risk

This ETF is best for long-term investors who are looking for a specific risk/return profile and are not trying to beat the market. It is also suitable for those seeking a hedge against market downturns.

The Innovator Buffer Step-Up Strategy ETF offers a defined risk/return profile, seeking to provide a buffer against downside risk while participating in market upside, up to a cap. It uses a laddered options strategy to achieve these objectives. The ETF is suitable for risk-averse investors seeking a specific level of protection and capped growth. Its performance depends on the underlying index, the defined buffer, and the cap level. Investors should be aware of the expense ratio and liquidity of the ETF before investing.

Data Sources:

• Innovator Capital Management Website
• ETF.com
• Morningstar

Disclaimers:

This analysis is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Please consult with a qualified financial advisor before making any investment decisions.