In my last two emails, I showed you how our new fund, the Tuttle Capital Innovation 100 Income and Hedge ETF (QQDH), seeks income and how it may pay distributions. I also showed you where each can lose money.
This one's about the hedge: what it's designed to do, and what it may not do.
Start with two declines.
In 2022, the Nasdaq-100® lost ~33%.¹
It took all year. Down a little, up a little, down again.
In April 2025, the same index had one of its worst two-day drops since 2007.²
It took two days.
Same index. Two different declines. A hedge built for one scenario may do little in the other.
QQDH's hedge is built mainly for the second kind: sharp, sudden drops.
In this email, I'll cover how the hedge works, when it's meant to help, and when it isn't.
Here's what I won't do. I won't tell you it protects your money. The hedge can't promise that, and neither can I.
Here's how it works. Each business day, usually in the afternoon, QQDH intends to establish a short-dated downside hedge that generally runs until the next trading day.
The next afternoon, it sets a new one.
It runs for one day, so it responds to one day's move. That leaves three outcomes:
The market holds steady or rises. The hedge may end worthless. The fund may lose what it paid for the put options it bought, or keep any net premium it collected from the put options it sold.
The market falls a little and ends near the hedge's levels. The hedge can lose money and make the fund's loss bigger.
The market falls hard in one day. The put option spread may gain in value, which may offset part of the fund's loss from the drop in its holdings' share prices, but may not offset all of it.
¹ Nasdaq-100 Index price change for calendar year 2022: −32.97%.
² Nasdaq, "Index Monthly Scorecard: April 2025." The Nasdaq-100's April 3–4, 2025 decline was its fourth-worst two-day loss since 2007.
None of this is my spin. It's how the prospectus describes the hedge, including the parts that cut against it.
You may have doubts:
"Why have a hedge that can make losses bigger?" Because that's the cost of this design. The fund accepts losses in some small drops in exchange for a hedge aimed at big one-day drops. That trade may not suit you.
"What about a slow fall?" The hedge may not help much. Each day's drop may be too small for it to realize an overall gain, and each new hedge starts at a lower level.
"So is my money protected?" No. The hedge may not be in place every day. Overnight jumps can affect it. There's no set limit on losses, and trading every day adds costs.
Think back to how a two-day drop feels. The screen turns red. You wonder what you own, and how far it goes.
I'd rather you understand QQDH's hedge before a day like that than during one.
That's all three pieces of QQDH: how it seeks income, how it may pay distributions and how it hedges.
Read the prospectus. If the trade-off makes sense to you, take a closer look. If it doesn't, pass.
Either way, you'll know what you're buying.
Matt Tuttle
Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. This and other information is in the prospectus, available at www.tuttlecap.com or by calling (833) 759-6110. Read it carefully before investing.
Investing involves risk, including possible loss of principal. The Fund is new, non-diversified, actively managed, and its performance is closely tied to QQQ and the Nasdaq-100, which are concentrated in technology and growth companies. The Fund uses options, which can lose value quickly. Put credit spreads can lose money when the market falls, and option losses and expenses may reduce participation in gains. The daily hedge is designed principally for sharp, short declines, may not help in gradual declines, may increase losses in modest declines, and may not limit losses. Distributions are not guaranteed, may vary, and may include return of capital, which reduces cost basis. Shares are bought and sold at market price, not NAV, and are not individually redeemed from the Fund. Tuttle Capital Management, LLC is the adviser. Distributed by Foreside Fund Services, LLC.
Terms used: Option: a contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a set price (the strike price) on or before a set date (the expiration date). The seller receives a payment (the premium) and takes on the obligation. Call option (call): an option that gives the buyer the right to buy the asset at the strike price. Put option (put): an option that gives the buyer the right to sell the asset at the strike price. Covered call: a strategy of owning an asset and selling call options on it; the premium is received, but gains above the strike price are given up. Put credit spread: selling a put option and buying a put option with the same expiration date and a lower strike price. The premium received from the sold put, less the premium paid for the purchased put, is the maximum potential profit of the spread; the maximum potential loss generally equals the difference between the two strike prices, less the net premium received. Short-dated downside hedge (daily hedge): options positions, generally expiring on the next trading day, that the Fund intends to establish each business day, generally by selling one put and buying puts at lower strike prices. It is designed principally for short, sharp declines and may not protect against gradual declines. Return of capital: a distribution that returns part of the money you invested, rather than income or gains.
¹ View the Fund's current holdings: https://www.incomeblastetfs.com/etf/qqdh. Holdings are subject to change.