Options in Your Corner: Hedging Equity Risk with SHUS
Investing in the stock market is exciting—but it can also be nerve-wracking. Markets go up, but they can also go down… fast. That’s where hedging comes in. Hedging may be like adding a seatbelt to your portfolio—it won’t prevent bumps in the road, but it seeks to potentially reduce the impact.
And one of the most common tools investors use to hedge is options.
What’s an Option?
An option is a financial contract that gives you the right (but not the obligation) to buy or sell a stock at a certain price before a certain date. There are two basic types:
- Call options give you the right to buy at a certain price.
- Put options give you the right to sell at a certain price.
When we’re talking about hedging, put options are the star of the show. Why? Because they may help limit losses when markets head south.
Hedging With Put Options—A Simple Example
Imagine you own a basket of U.S. stocks. You’re optimistic long-term, but short-term, you're nervous. What if the market drops 10%? You don’t want to sell everything—but you do want to protect your downside.
That’s where put options come in. Buying a put option on the S&P 500, for example, gives you the right to sell the index at a fixed price, even if the market falls. If stocks tumble, the put increases in value, offsetting some of your losses. It’s a similar theory to buying an umbrella before it rains.
But there’s a catch: options cost money. And just like insurance, you pay for protection whether or not you end up needing it.
What’s a Hedged Equity ETF?
Now, imagine combining a portfolio of stocks with a built-in options strategy designed to help reduce risk. That’s what a hedged equity ETF aims to do. It invests in equities but also uses options to potentially cushion the blow during market downturns.
Enter the Stratified LargeCap Hedged ETF (SHUS)
How SHUS Uses Options
SHUS is designed to offer diversified exposure to U.S. large-cap stocks—but with a twist. It uses a systematic put spread strategy to offer a potential layer of protection. Here’s how it works:
- SHUS holds a “stratified-weighted” portfolio of U.S. stocks, meaning it aims to diversify more evenly across sectors and stocks, avoiding concentration in mega-cap names.
- At the same time, it buys and sells S&P 500 put options in a structured way, possibly helping reduce the downside if markets turn volatile.
- By selling put options as part of a spread strategy, the fund generates income to help offset the cost
SHUS tries to provide investment results corresponding to the performance of Comprising the Syntax LargeCap Index.Think of SHUS as a portfolio that seeks to be spread out thoughtfully but may also carry a built-in parachute.
Why It Matters
In a world where market concentration is high and volatility can strike without warning, SHUS offers a one-ticker way to get diversified equity exposure plus a hedge—no options expertise required.
So, if you’re looking for a way to stay invested in U.S. equities while managing the bumps along the way, SHUS might be worth a closer look.
Curious about it’s holdings, click here: Explore SHUS>>
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (866) 972-4492 or visit our website at https://stratifiedfunds.com/investor-materials. Read the prospectus or summary prospectus carefully before investing.
The Funds are distributed by Foreside Fund Services, LLC. Exchange Traded Concepts, LLC serves as the investment advisor. Foreside Fund Services, LLC. is not affiliated with Exchange Traded Concepts, LLC or any of its affiliates.
Investing involves risk, including loss of principal. The Funds are subject to certain other risks, including but not limited to, equity securities risk, large-capitalization risk, index tracking risk, passive strategy/index risk, and market trading risk. Investing involves risk, including possible loss of principal. There can be no guarantee the Fund will meet its investment objectives.
SSPY Risks: The Fund is subject to certain other risks, including but not limited to, equity securities risk, large-capitalization risk, index tracking risk, passive strategy/index risk, and market trading risk. Investing involves risk, including possible loss of principal.
SHUS Risks: The Fund is actively managed using a proprietary process, and there can be no guarantee that the Fund's investment strategies will be successful. The Fund may invest in Underlying Funds or Securities that are managed with a passive investment strategy, attempting to track the performance of an unmanaged index of securities. This differs from an actively-managed fund, which typically seeks to outperform a benchmark index. Maintaining investments in securities regardless of their individual performance or market conditions could negatively affect the Fund's return. The Fund is subject to certain other risks, including but not limited to, equity securities risk, large-, mid-, and small-capitalization risk, and market trading risk. Investing in securities of small and mid-sized companies may involve greater volatility than investing in larger and more established companies. Certain investments may be subject to restrictions on resale, trade over-the-counter or in limited volume, or lack an active trading market. Purchased put options may expire worthless and may have imperfect correlation to the value of the Fund’s sector based investments. Written call and put options may limit the Fund’s participation in equity market gains and may amplify losses in market declines. The Fund’s losses are potentially large in a written put or call transaction. If unhedged, written calls expose the Fund to potentially unlimited losses. The Fund invests in derivatives. Derivatives are financial instruments that derive their performance from an underlying reference asset, such as an index. The return on a derivative instrument may not correlate with the return of its underlying reference asset. Derivatives can be volatile and may be less liquid than other securities.
Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Investors may purchase or sell individual shares on an exchange on which they are listed. Market returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. Eastern time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times. Please see the prospectus for more details.
The Syntax Stratified LargeCap Index™ is the property of Syntax, LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices or its affiliates or its third-party licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by Syntax, LLC, the parent company of Syntax Advisors, LLC. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”), and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).
The Syntax Stratified LargeCap Index™ is the property of Syntax, LLC, the Fund’s index provider. Syntax®, Stratified®, Stratified Indices®, Stratified Weight™, and FIS™ are trademarks or registered trademarks of Locus LP. Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index.
Stratified Weight™ is the weighting methodology by which Syntax diversifies an index’s constituent companies that share “Related Business Risks.” Related Business Risk occurs when two or more companies provide similar products and/or services or share economic relationships such as having common suppliers, customers or competitors. The process of identifying, grouping, and diversifying holdings across Related Business Risk groups within an index is called stratification, and was designed by Syntax to seek to correct for business risk concentrations that regularly occur in capitalization-weighted indices and equal-weighted indices.
The Stratified Hedged Strategy combines the benefits of exposure to a Stratified Weight™ equity portfolio with a rules-based protection program managed by Exchange Traded Concepts to reduce the risk of losses due to market downturns.
Diversification does not ensure a profit or guarantee against a loss.
The S&P 500® Index is a market-capitalization-weighted index of the 500 leading publicly traded companies in the U.S.
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