How does the DSOC ETF's structured outcome strategy work?

The DSOC ETF employs a structured outcome strategy using FLEX Options to seek specific target investment outcomes based on the performance of the Underlying ETF over an approximate one-year Investment Period. It aims to provide upside participation that matches the returns of the Underlying ETF up to a predetermined Cap, while offering a Buffer against certain losses of the Underlying ETF within the range of 5% to 30%.

What are the potential outcomes for investors holding DSOC ETF shares for an entire Investment Period?

If the Underlying ETF appreciates over the Investment Period, the DSOC ETF's strategy is intended to provide upside participation matching the Underlying ETF's returns, up to the Cap set at the start of the Investment Period. If the Underlying ETF declines in value, the DSOC ETF will experience losses on a one-to-one basis with the Underlying ETF, before Fund fees and expenses.

How does the Buffer protect against losses in the DSOC ETF?

The DSOC ETF seeks to provide a Buffer of between 5% and 30% against Underlying ETF losses over each Investment Period. This means the Fund will bear the first 5% of losses, and beyond that, it will buffer against Underlying ETF losses up to 30%. The Buffer is intended to provide a level of protection for the Fund's investors.

What is the Cap in the DSOC ETF and how does it impact returns?

The Cap in the DSOC ETF represents the maximum percentage return an investor can achieve from an investment in the Fund for an entire Investment Period. If the Underlying ETF experiences gains over the Investment Period exceeding the Cap, the DSOC ETF will not benefit from those excess gains, and the Cap acts as a ceiling on potential returns.

6 min read

By Ron Koren, ETF Insider

What is the DSOC ETF ?

DSOC ETF: Overview

The DSOC ETF, or Innovator Double Stacker ETF™, is a unique financial instrument that offers exposure to two well-known exchange-traded funds: the SPDR® S&P 500® ETF Trust (S&P 500 ETF) and the Invesco QQQ TrustSM, Series 1 (QQQ ETF). The DSOC ETF utilizes a portfolio of Flexible Exchange® Options (FLEX Options) linked to the performance of these underlying ETFs. It aims to provide returns based on the price performance of the S&P 500 ETF, with potential supplementary gains from the QQQ ETF, subject to specific upside return caps.

DSOC ETF Underlying and Exposure: What Does it Track and How?

The DSOC ETF invests substantially all of its assets in a portfolio of FLEX Options referencing both the S&P 500 ETF and the QQQ ETF. Each of the Underlying ETFs is an exchange-traded fund registered under the Investment Company Act of 1940. The S&P 500 ETF seeks to track the performance of the S&P 500 Index, which includes 500 leading companies in leading industries. On the other hand, the QQQ ETF seeks to track the NASDAQ-100 Index, comprising 100 of the largest domestic and international non-financial companies listed on the NASDAQ Stock Market, LLC. Through its use of FLEX Options, the DSOC ETF gains significant exposure to information technology companies. FLEX Options are exchange-traded options contracts with customizable terms, although they may be less liquid than more traditional options. The Fund's strategy is designed to provide returns at the end of each Outcome Period (approximately one year) based on the performance of the Underlying ETFs.

DSOC overlap What is the DSOC ETF ?

DSOC ETF: Benefits of Investing

Diversification: By investing in a portfolio of FLEX Options linked to two major ETFs, investors can achieve diversification across a wide range of companies and industries.
Upside Potential: The DSOC ETF aims to provide returns based on the price performance of the S&P 500 ETF, with additional potential gains from the QQQ ETF.
Limited Downside Risk: The Fund will not participate in losses experienced by the QQQ ETF during an Outcome Period, which may provide some downside protection.
Customizable Exposure: FLEX Options allow for customization, enabling investors to tailor their exposure to the market according to their risk preferences.

DSOC ETF: Considerations Before Investing

Before investing in the DSOC ETF, investors should take into account the following considerations:
Upside Return Caps: The DSOC ETF is subject to upside return caps, limiting the maximum percentage return the Fund can achieve during an Outcome Period. These caps are determined at the beginning of each period based on prevailing market conditions.
Potential Losses: While the Fund will not participate in QQQ ETF losses during an Outcome Period, investors should be aware of the possibility of loss in the Fund's net asset value if the QQQ ETF's share price decreases while an Outcome Period is ongoing.
Non-Diversified Classification: The DSOC ETF is classified as "non-diversified" under the Investment Company Act of 1940. This means the Fund may invest a significant portion of its assets in a limited number of holdings, potentially increasing its risk.
Investment Time Horizon: To achieve the desired outcomes, investors must hold Shares from the beginning to the end of an Outcome Period. Those who buy or sell Shares during the Outcome Period may experience different investment returns.

Conclusion

The DSOC ETF, or Innovator Double Stacker ETF™, offers investors a unique opportunity to gain exposure to the S&P 500 ETF and the QQQ ETF through a portfolio of FLEX Options. It aims to provide returns based on the price performance of these underlying ETFs, with potential supplementary gains subject to specific upside return caps. However, investors should carefully consider the Fund's characteristics, upside return caps, and other considerations before making an investment decision. As always, it is essential to conduct thorough research and seek professional advice before investing in any financial instrument.

Disclaimer: This article does not provide investment advisory services. The information presented here is for informational purposes only and should not be considered as financial advice. Investors should conduct their own research and consult with a qualified financial advisor before making investment decisions.

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FAQ

What is the DSOC ETF?
The DSOC ETF, also known as the Pacer Lunt Dorsey Wright Defensive Equity ETF, is an actively managed exchange-traded fund that invests in FLEX Options referencing the market price of the SPDR® S&P 500® ETF Trust (the "Underlying ETF").
How does the DSOC ETF's structured outcome strategy work?
The DSOC ETF employs a structured outcome strategy using FLEX Options to seek specific target investment outcomes based on the performance of the Underlying ETF over an approximate one-year Investment Period. It aims to provide upside participation that matches the returns of the Underlying ETF up to a predetermined Cap, while offering a Buffer against certain losses of the Underlying ETF within the range of 5% to 30%.
What are the potential outcomes for investors holding DSOC ETF shares for an entire Investment Period?
If the Underlying ETF appreciates over the Investment Period, the DSOC ETF's strategy is intended to provide upside participation matching the Underlying ETF's returns, up to the Cap set at the start of the Investment Period. If the Underlying ETF declines in value, the DSOC ETF will experience losses on a one-to-one basis with the Underlying ETF, before Fund fees and expenses.
How does the Buffer protect against losses in the DSOC ETF?
The DSOC ETF seeks to provide a Buffer of between 5% and 30% against Underlying ETF losses over each Investment Period. This means the Fund will bear the first 5% of losses, and beyond that, it will buffer against Underlying ETF losses up to 30%. The Buffer is intended to provide a level of protection for the Fund's investors.
What is the Cap in the DSOC ETF and how does it impact returns?
The Cap in the DSOC ETF represents the maximum percentage return an investor can achieve from an investment in the Fund for an entire Investment Period. If the Underlying ETF experiences gains over the Investment Period exceeding the Cap, the DSOC ETF will not benefit from those excess gains, and the Cap acts as a ceiling on potential returns.

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