Innovator, the firm behind the first defined-outcome ETFs, launched a new category of products on Tuesday: Dual Directional Buffer ETFs. These funds aim to give investors the ability to profit from both modest gains and modest losses in the market while still offering downside protection.
The first two funds in the lineup are the Innovator Equity Dual Directional 15 Buffer ETF (DDFL) and the Innovator Equity Dual Directional 10 Buffer ETF (DDTL).
Like traditional buffer ETFs, these are built using options to deliver a specific outcome over a one-year period. But instead of only offering capped upside and downside buffers, these new ETFs introduce an inverse return feature.
For example, if the S&P 500 rises, DDFL will match the return up to 8.79% (gross of fees). If the market falls anywhere between 0% and 15%, the fund will increase by the same amount, delivering a positive return equal to the market’s decline, up to 15%.
But if the market drops more than 15%, DDFL does not provide any inverse gains. Instead, it simply absorbs the first 15% of losses; investors bear any losses beyond that.
That means DDFL can generate positive returns even in modestly declining markets, something traditional buffer ETFs do not offer. For comparison, a traditional buffer ETF like the Innovator U.S. Equity Power Buffer ETF – July Series (PJUL) provides a higher upside cap of 12.09% and a 15% downside buffer but no potential gains in down markets.
In other words, with the new “dual directional buffer ETFs,” you’re giving up some upside in return for the ability to profit from moderate declines. PJUL will outperform in strong bull markets due to its higher cap, while DDFL is better positioned for modest pullbacks since it offers gains when the market falls by up to 15%.
This new structure adds to Innovator’s growing defined-outcome ETF lineup, which already includes variations across buffer levels, index exposures and asset classes.
As with all defined-outcome ETFs, it’s important to note that the promised returns are based on holding these dual-directional buffer ETFs through the end of the outcome period. If you sell early, performance can vary depending on when you enter and exit.
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