Buffer Madness

Following criticism of a prior analysis of options-based strategies like defined outcome funds and buffered ETFs, the author presents updated data through April 30 showing that 86% of funds in three Morningstar categories (Derivative Income, Defined Outcome, Options Trading - Equity Hedged) delivered lower returns than a simple passive equities plus cash combination over 5+ years. Additionally, 70% of these funds underperformed while also experiencing worse peak-to-trough drawdowns. The author addresses six main criticisms of the original piece and proposes that the industry's appeal despite weak empirical support stems from a placebo effect.