CDX - CDX: If You Want To Buy High Yield Here Buy It Hedged
2024-06-25 05:28:25 ET
Summary
- CDX outperformed competitors HYG and JNK in the past year from a total return perspective, and with a better drawdown profile.
- CDX utilizes put spreads on the S&P 500 to hedge downside moves, providing insurance against market losses.
- The fund offers a lower drawdown in a market sell-off due to its embedded hedge profile and put spreads, making it a smart choice for investors.
- The ETF provides the best hedge in sudden down markets via its structure, while prolonged recessionary periods will cause its profile to match HYG's.
Thesis
The Simplify High Yield PLUS Credit Hedge ETF ( CDX ) is a fund we wrote about twelve months ago. The exchange-traded fund is a fairly new addition to the fixed income arena, and it aims to deliver junk bond returns with an embedded market hedge. We have written numerous articles recently highlighting that credit spreads are currently at the bottom of their historic range, therefore buying high yield credit here is not an optimal choice....
CDX: If You Want To Buy High Yield Here, Buy It Hedged