Cboe Vest Large Cap Buffered Portfolio, Series 9
Losses can have a greater impact on investments than gains because the money left after the loss must work harder just to get back to the original levels. The math of
percentages shows that as losses get larger, the return necessary to recover to the break-even point increases at a much faster rate. A loss of 10% necessitates an 11% gain to
recover. Increase that loss to 25%, and it takes a 33% gain to get back to break-even. A 50% loss requires a 100% gain to get back to where the investment value started. The
Cboe Vest Large Cap Buffered Portfolio may encourage investors to stay invested by providing a defined buffer against potential losses.
The Cboe Vest Large Cap Buffered Portfolio is designed to provide equity investors with growth potential in up markets, while providing a limited buffer in down markets. The
portfolio seeks to provide returns based on the price performance of shares of the SPDR® S&P 500® ETF (“SPY” or “underlying ETF”), subject to a capped amount, while also
providing a limited downside buffer.
Seeking a Balance of Upside Performance Potential With a Downside Buffer
Growth potential is a common goal for equity investors, but often, market drawdowns that are difficult to predict can have a significant impact on investment returns. The
Cboe Vest Large Cap Buffered Portfolio seeks a balance of performance, subject to a cap, with a downside buffer using a disciplined option strategy. The portfolio invests in
FLexible EXchange® Options (“FLEX Options”) based on SPY, an exchange-traded fund (ETF) that is designed to track the returns of the S&P 500 Index. The portfolio seeks to
meet the following goals:
The Cboe Vest Large Cap Buffered Portfolio is a unit investment trust (UIT), which is a pooled investment vehicle with a fixed portfolio that is unmanaged and held for a
predetermined amount of time. The ability of the portfolio to provide returns with a capped upside and defined buffer against losses is dependent on unit
holders purchasing units on the initial date of deposit and holding them until the portfolios’ termination date. The intended return for units purchased on a
portfolio’s initial date of deposit and held for the life of the portfolio is based on the performance of the underlying ETF and the value of the FLEX options on the FLEX option
expiration date. The intended return is subject to a capped amount per unit and may represent a return that is worse than the performance of the underlying ETF. Even if there
are significant increases in the value of the underlying ETF, the amount received is capped.
Illustrative Return Scenarios with 10% Buffer
|Not FDIC Insured Not Bank Guaranteed May Lose Value
Both the cap and buffer are fixed levels that are calculated in relation to the price of the underlying ETF as of the market close on the day prior to the trust’s initial date of deposit. Because you will not be able to
purchase units until the initial date of deposit, any change in the market value of the trust’s assets between the market close on the day prior to the initial date of deposit and the evaluation time on the initial date
of deposit will result in unitholders experiencing a cap or a buffer slightly different from what is described above.
buffered UIT’s performance may be impacted by a variety of factors, including, but not limited to, redemption activity, unusual economic events, market movements and changes in the liquidity of the FLEX options.
A buffered UIT is not managed. In the unlikely event that the proper ratios between the FLEX options cannot be maintained, there may be a significant impact to a buffered UIT’s ability to meet its investment
objective or follow its principal investment strategy. The Sponsor may elect to postpone the trust if certain adverse market conditions occur that affect volatility and pricing of the FLEX options.
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial professional
or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
An investment in an unmanaged unit investment trust should be made with an understanding of the risks involved with owning FLEX options based on an underlying ETF.
The portfolio has characteristics unlike many other traditional investment products and may not be suitable for all investors.
FLEX options are European style options, which are exercisable at the strike price only on the FLEX option expiration date. The FLEX options held by the portfolio give the option holder the right to buy or sell the underlying ETF on the FLEX option expiration date at the strike price. Prior to their expiration on the FLEX option expiration date, the value of the FLEX options is determined as discussed under “The Value of the Securities.” section of the full prospectus. The value of the FLEX options prior to their expiration on the FLEX option expiration date may vary because of factors other than fluctuations in the value of the underlying ETF. The value of FLEX options will be affected by changes in the value of the underlying ETF, the underlying index and its underlying securities, a change in interest rates, a changein the expected dividend rate of the underlying ETF, a change in the actual and perceived volatility of the stock market and the underlying index and the remaining time to expiration. Additionally, the value of the FLEX options does not increase or decrease at the same rate as the underlying ETF, the underlying index or its underlying securities due to “tracking error” as described in more detail in the full prospectus (although they generally move in the same direction). Options are subject to various risks including that their value may be adversely affected if the market for the option becomes less liquid or smaller. In addition, options will be affected by changes in the value and dividend rates of the stock subject to the option, a change in interest rates, a change in the actual and perceived volatility of the stock market and the common stock and the remaining time to expiration.
FLEX options represent indirect positions in an underlying ETF and are subject to risks associated with changes in value as the price of the underlying ETF rises or falls. The investment in the FLEX options includes the risk that their value may be affected by market risk related to the underlying ETF, the underlying index and the value of the securities in the underlying index held by the underlying ETF. Market risk is the risk that the value of the securities will fluctuate. Market value fluctuates in response to various factors. These can include changes in interest rates, inflation, the financial condition of a security’s issuer, perceptions of an issuer, ratings on a bond, or political or economic events affecting the issuer. While the FLEX options are individually related to the underlying ETF, the return on the FLEX options depends on the price of the underlying ETF at the close of the NYSE on the FLEX option expiration date and will be substantially determined by market conditions and the underlying ETF and the value of the securities comprising the underlying ETF as of such time.
ETFs are subject to various risks, including management’s ability to meet the fund’s investment objective, and to manage the fund’s portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors’ perceptions regarding ETFs or their underlying investments change. Unlike open-end funds, which trade at prices based on a current determination of the fund’s net asset value, ETFs frequently trade at a discount from their net asset value in the secondary market. Certain of the ETFs may employ the use of leverage, which increases the volatility of such funds.
ETFs that invest in common stocks are subject to certain risks, such as an economic recession and the possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.
A portfolio may experience substantial downside from the FLEX options and option contract positions may expire worthless. A portfolio does not provide principal and you may not receive a return of the capital you invest. You may experience significant losses on your investment up to an almost total loss on your investment if the value of the underlying ETF decreases by greater than a specified level from the initial underlying ETF level. A portfolio might not achieve its objective in certain circumstances. You may realize a return (including a loss) that is higher or lower than the intended returns as a result of redeeming Units prior to the portfolio’s mandatory termination date and in various circumstances, including where FLEX options are otherwise liquidated by the portfolio prior to their expiration or maturity, if the portfolio is unable to maintain the proportional relationship of the FLEX options in the portfolio or increases in potential expenses of the portfolio above estimated levels. A portfolio’s investment strategy is designed to achieve its investment objective over the life of the portfolio. An increase in the value of the written FLEX options reduces the value of your Units. As the value of the written FLEX options increases, the written FLEX options have a more negative impact on the value of your Units. You should note that even if the value of the underlying ETF does not change, if the value of a written FLEX option increases (for example, based on increased volatility of the underlying index) your Units will lose value. After the premium is received on the written FLEX options, the written FLEX options will reduce the value of your Units.
Credit risk is the risk that a security’s issuer, guarantor or counterparty of a security is unable or unwilling to make dividend, interest or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer’s ability or willingness to make such payments. The OCC is guarantor and central counterparty with respect to the FLEX options. As a result, the ability of the portfolio to meet its objective depends on the OCC being able to meet its obligations.
Liquidity risk is the risk that the value of a security will fall if trading in the security is limited or absent. No one can guarantee that a liquid trading market will exist for the securities. The FLEX options are listed on the CBOE; however, no one can guarantee that a liquid secondary trading market will exist for the FLEX options. Trading in the FLEX options may be less deep and liquid than certain other securities. The FLEX options may be less liquid than certain non-customized options. In a less liquid market for the FLEX options, liquidating the FLEX options may require the payment of a premium (for written FLEX options) or acceptance of a discounted price (for purchased FLEX options) and may take longer to complete. In a less liquid market for the FLEX options, the liquidation of a large number of options may more significantly impact the price. A less liquid trading market may adversely impact the value of the FLEX options and your Units and result in the portfolio being unable to achieve its investment objective.
The value of the securities held by a trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers of the securities held by the underlying ETF.
Cboe® is a registered trademark of Cboe Exchange, Inc., which has been licensed for use in the product. The product is not sponsored, endorsed, sold or marketed by Cboe Exchange, Inc. or any of its affiliates (“Cboe”) or their respective third-party providers, and Cboe and its third-party providers make no representation regarding the advisability of investing in the product and shall have no liability whatsoever in connection with the product.
The recent outbreak of a respiratory disease designated as COVID-19 was first detected in China in December 2019. The global economic impact of the COVID-19 outbreak is impossible to predict but is expected to disrupt manufacturing, supply chains and sales in affected areas and negatively impact global economic growth prospects. The COVID-19 outbreak has also caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of the COVID-19 outbreak may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.