This is a defined outcome ETF that provides exposure to a US equity index while using options to protect against deeper-range losses. Over a one-year outcome period, it cushions a wider range of losses than a standard buffer, but in exchange applies a lower upside cap. The structure is reset every January.

It suits conservative investors who want to invest in US stocks, receive protection against deeper-range losses, and accept a lower upside cap in return.

The ETF is managed by First Trust using a passive (index-tracking) approach.

The ETF gains exposure to a US equity index and uses an options structure to cushion deeper-range losses than a standard buffer over the one-year outcome period. In return, it places a lower cap on upside returns. A new buffer and cap are set each January, and buying partway through the outcome period can change the protection and cap that apply.

• Structure that cushions deeper-range losses
• Defined outcome design with a lower upside cap

Assets under management (AUM) stand at $457.9M, and the total expense ratio is 0.85% per year.

Compared with other buffer and defined outcome ETFs such as BUFR and BUFD, the main points of comparison are the level of protection, the cap level, and the outcome period.

Deep buffer strategies tend to see returns more limited than the underlying index in rising markets because of the lower cap, while in falling markets they cushion a wider range and sharply reduce drawdowns. The protection and cap that actually apply depend on whether you enter partway through the outcome period.

Defined outcome products tend to attract inflows from demand for downside protection when market uncertainty rises, and money sometimes moves into this product group when demand for greater protection grows. It is also worth noting that performance varies with market conditions and the outcome period.

Deeper downside cushioning is its strength, while the lower upside cap, dependence on the outcome period, and changed terms for mid-period entry are points to consider.

For direct exposure to US stocks without protection, direct substitutes include SPY and VOO, which track the S&P 500. For a laddered buffer that spreads across several outcome periods, products such as BUFR are also worth comparing. For buffer products with a different start month, GFEB can also be considered. The three products shown in the table, BUFR, BUFD, and PJAN, differ in protection range and structure: a laddered buffer, a deep buffer, and a buffer with a different start month. This ETF is differentiated by its deeper buffer structure with a January start.

Here are the points to review before investing in DJAN. The deeper downside cushion is attractive, but the lower upside cap, dependence on the outcome period, and the limits of the cushion should be confirmed in advance. It is best to approach the product only after fully understanding the defined outcome structure.

The low upside cap and large declines that exceed the buffer are the main variables for performance, and buying partway through the outcome period changes the protection and cap that apply. Without a sufficient understanding of the defined outcome structure, results may differ from expectations.

It is a suitable candidate for conservative investors who want to invest in US stocks while being protected against deeper-range losses. For investing without protection, products such as SPY and VOO fit better, and for a deeper buffer structure, it is advisable to choose this product after understanding its structure.