A couple of weeks ago, I was a speaker at the MoneyShow Masters Symposium in Las Vegas. I gave a presentation on a new type of ETF that uses autocallable/barrier notes to generate high yields with less stock market volatility.
When I asked for a show of hands, no one in the room was familiar with ETFs using an autocallable strategy.
An autocallable note is a structured, market-linked debt instrument that pays a regular coupon—typically monthly—as long as a reference index stays above a predefined level.
If the index performs strongly enough, the note redeems early and returns principal ahead of its scheduled maturity date. If the index falls sharply and stays down, income can be interrupted, and principal can be at risk.
Simplify ETFs was one of the first fund sponsors to offer an ETF using this type of note. The fund managers there have taken a slightly different approach. They use custom put options with a barrier based on the worst of the S&P 500, Nasdaq 100, and Russell 2000 indices .
Puts are sold with a barrier 30% below current index levels. They expire in one year, and if at expiration one of the indexes is down more than 30%, the fund will participate in the index loss. If the drop is less than 30%, the puts expire, which is what we want to happen.
The puts are callable each month. If all three indices are above the initial value, the puts will be called in, thus the autocallable tag. Having a put called is a good thing, because the company then sells another, earning more income for the fund.
The fund I’d specifically like to mention here is the Simplify Barrier Income ETF (SBAR), which launched on April 14, 2025. Dividends are paid monthly, and the current distribution yield is 11.75%.
The beauty of this type of ETF is that it pays great yields with much more share price stability than covered call ETFs.
Here are the share price and total return results since SBAR launched:
Over time, the return from SBAR will be very close to the distribution yield.
Our team at Investors Alley has become the experts on autocallable ETFs. We have included several in our income-focused recommendations.
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