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

It suits conservative investors who want U.S. equity exposure with protection against deeper-range declines and who are willing to accept a lower upside cap.

This is a passive (index-tracking) ETF managed by First Trust.

The fund provides exposure to a U.S. equity index and uses an options structure to cushion deeper-range declines 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 May, and buying partway through the outcome period can change the protection and cap that apply to you.

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

Assets under management (AUM) are $393.1M, 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 downside protection, the cap level, and the outcome period.

Deep buffer strategies tend to show more limited returns than the underlying index in rising markets because of the lower cap, while in falling markets they cushion a wider range and sharply reduce the drawdown. 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.

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

For direct U.S. equity exposure 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, products such as 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, respectively. This ETF is differentiated by its deeper buffer structure based on a May start.

Here are the points to check before investing in DMAY. Deeper downside cushioning 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 lower 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. If you do not fully understand the defined outcome structure, you may get results that differ from your expectations.

It is a suitable candidate for conservative investors who want U.S. equity exposure with protection against deeper-range declines. If you want to invest without protection, consider products such as SPY and VOO. If you want a deeper buffer structure, it is advisable to choose this product after understanding its structure.