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Who does not like to sleep well at night? That good night’s sleep has come at an extreme premium these days, especially for growth investors. The ETF we are going to discuss is designed to appeal to the crowd that values a relaxed investing attitude over anything else. After all, what good is money if you cannot enjoy it?

The Amplify BlackSwan Growth & Treasury Core ETF (SWAN) seeks investment results that correspond to the S-Network BlackSwan Core Index. The Index that SWAN follows, aims to seek uncapped exposure to the S&P 500 (SPY), while buffering against the possibility of large losses. There are tons of ETFs these days which are trying to do this with different methods. Most of them use options in some form or another and SWAN is no different. Approximately 90% of the fund’s assets are invested in Treasury bonds, and the remaining 10% are invested in SPY LEAP Options in the form of in-the-money calls.


The fund literally has 8 holdings, making the “view all holdings” link rather redundant.

SWAN ETF Holdings

SWAN Holdings

Amplify ETFs

There are 6 different Treasury bonds/notes, with maturities from 2023 to 2051. The two LEAP options are for SPY strikes $400 and $375. Rebalancing is done twice a year to keep the fund on track.


The fund has done a remarkable job of capturing a good deal of the up move of the SPY while minimizing drawdowns.

SWAN ETF Performance

SWAN Performance

Amplify ETFs

Most interesting was the fund performance during the discovery of the pandemic. One part came from appreciation of Treasury bonds and some of it likely came as implied volatilities increased, increasing value of LEAP options held.

Data by YCharts

This obviously contributed to these wonderful statistics shown below.

SWAN ETF Sharpe Ratio

SWAN Sharpe Ratio

Amplify ETFs


The outlook we are about to provide for SWAN is colored by the macro outlook for the S&P 500 and the treasury bonds. It is also colored by how we expect options to perform over time in this environment. It is not remotely influenced by how the fund did perform over the last 3 years. After all, we would not expect the 1997-1999 period to be remotely representative of what returns one could expect from a technology fund in the three years after that. Past returns are not representative of forward ones and this is more true today than most periods in history.

With 90% of the holdings being Treasury bonds, we address the interest rate outlook first. Our tune has been the same for some time, where we continue calling longer term bond holdings as return-free-risk. Now obviously the extent of that risk is influenced by the duration and interest rates on bonds. For example, we heavily panned the French 50 year bonds and the extremely long dated nature of those made them vulnerable to even modest swings in interest rate. The yield on those barely moved by 60 basis points since their issuance last year.


Excusez Moi


Even that tiny move knocked out 46 years of interest payments. The good news for US treasury bonds is that they are no longer half as dangerous as they were in October 2020. This is of course a consequence of you having already lost 13 years of yield on the 10 year bond from that point. The longer dated bonds (EDV) fared far worse.

Data by YCharts

SWAN’s holdings are also well spread out and more than half of the bond holdings mature before 2028. So while we remain bearish on bonds, and this carries duration risk, it still gets a pass on the Treasury holdings versus some longer dated bombshells that investors are embracing.

The Option Strategy

Here though, we have to take the opposite side. The idea of buying call options does limit losses. It also does limit severe drawdowns. Both those are true in an up trending market. In a market that spends several years moving sideways to down and then ends back up to the same spot, this call option strategy can become a lead balloon. Yes, losses are limited on this strategy as the fund is only investing 10% a time in these.

But over time if this outcome comes to pass, the fund will repeatedly do this, again and again. A long-term sideways market will have many sharp drawdowns. In each case, volatility will be high and purchasing options will be more expensive as implied volatility will be higher. We’d rather be sellers of volatility rather than purchasers during an entire course like this. Finally, this ETF is pinned on the SPY and we rather have as little to do directly with the entire index as possible. Stock selection is critical and US indices are to be avoided in our book.


Without knowing the exact path the SPY will take over the next 10 years, one cannot predict the returns of this strategy. Even if you knew the exact ending value, which would make it relatively easy to come up with a number for SPY total returns, one could not do it for SWAN. The limited duration of the fund’s bond holdings and a clear strategy are plus factors for the investor. The fees are reasonable (0.49%) for this fund.

What you lose out in dividends by direct investment in the SPY, you make for in the bond holding yields. That said, we think selling volatility is a better longer-term bet than purchasing it at these valuations of the market. Based on all the information, we are giving it a neutral rating. This fits alongside the JPMorgan Equity Premium Income ETF (JEPI), another option strategy fund. The rating sits above the Nationwide Risk-Managed Income ETF (NUSI) where we think the NASDAQ bubble will make a mockery of trying to capture returns via option collars.

Please note that this is not financial advice. It may seem like it, sound like it, but surprisingly, it is not. Investors are expected to do their own due diligence and consult with a professional who knows their objectives and constraints

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