# 100% Buffer ETFs vs. Treasury Bills: What Is the Difference? Source: https://www.vistashares.com/100-percent-buffer-etfs-vs-treasury-bills/ Published: 2026-11-13 | Updated: 2026-11-13 By Adam Patti, Chief Executive Officer, VistaShares | November 2026 A 100% buffer ETF uses options to absorb all of an index's losses over its outcome period for investors who hold the full period, before fees, in exchange for a cap that is usually modest. A Treasury bill pays a known amount at maturity backed by the U.S. government. The buffer ETF offers a chance at equity gains up to the cap with a zero floor on index losses; the Treasury bill offers a known return with no equity link. Attribute | 100% buffer ETFs | Treasury bills | What it is | A fund whose options are designed to absorb all index losses over an outcome period | Short-term U.S. government debt with terms of 4 to 52 weeks | How it earns | Index price gains up to a cap set at the start of the period | The difference between purchase price and face value | Return known in advance | No; ranges from about zero to the cap for full-period holders, before fees | Yes, if held to maturity | Main risks | Fees reducing results below zero, mid-period entry or exit, option performance | Reinvestment at lower rates, inflation | Interim price moves | Can rise and fall during the period | Small, and they converge to face value at maturity | Costs | Expense ratio; no index dividends | Usually minimal, often none when bought at auction | Taxes in general terms | Gains generally taxed when shares are sold | Interest taxed federally; exempt from state and local income tax | Typical use | Equity upside with a defined zero floor on index losses | Cash reserves and known short-term returns | ## What is a 100% buffer ETF? A 100% buffer ETF is designed so that, for an investor who buys on the first day of the outcome period and holds to the last, the fund's options absorb the full decline of the reference index, such as the S&P 500, before fees and expenses. Gains are capped at a level set on the first day. Because absorbing all losses is expensive, the cap is typically much lower than on a standard 10% buffer fund. Our article on [100% buffer ETFs](https://www.vistashares.com/what-are-100-percent-buffer-etfs/) explains how they are built. The cap is closely related to interest rates. In effect, the fund gives up the interest it could have earned on cash in exchange for index upside. When short-term rates are higher, caps on 100% buffer funds tend to be higher; when rates are low, caps tend to be low. ## What is a Treasury bill? Treasury bills are short-term securities issued by the U.S. Treasury with terms of 4, 6, 8, 13, 17, 26 and 52 weeks. They are sold at a discount or at par, and the holder receives face value at maturity. The interest is subject to federal income tax but exempt from state and local income taxes.[1] Treasury bills are among the most widely used instruments for holding cash. ## How do outcomes compare? Consider $100,000 for one year in Treasury bills yielding 4% or in a 100% buffer ETF on the S&P 500 with a 7% cap and a 0.75% expense ratio, held for the full outcome period. (Hypothetical, before fees and expenses except the expense ratio shown.) **Index falls 20%:** Treasury bills about $104,000. Buffer ETF about $99,250, as the buffer absorbs the loss but the fund's expenses reduce the result. **Index is flat:** Treasury bills about $104,000. Buffer ETF about $99,250. **Index rises 5%:** Treasury bills about $104,000. Buffer ETF about $104,250. **Index rises 15%:** Treasury bills about $104,000. Buffer ETF about $106,250, limited by the cap. The buffer ETF comes out ahead only when the index rises by more than the Treasury yield plus fees. In falling and flat years, Treasury bills win by the interest earned. The question for an investor is whether the chance of earning up to the cap is worth giving up a known return. ## Why can a 100% buffer ETF still lose money? **Fees:** the buffer is measured before fees, so in a flat or falling year the expense ratio produces a small loss. **Timing:** the stated terms apply to full-period holders. An investor who buys after the fund has risen may pay more than the value the buffer covers; one who sells mid-period receives the market price, which reflects option values at that moment. FINRA has noted that investors who do not hold for the full period may experience results that differ significantly from the stated outcomes.[2] Our article on [buying a buffer ETF mid-period](https://www.vistashares.com/buying-a-buffer-etf-mid-period/) explains how to read remaining values. **Option performance:** the strategy relies on options performing as intended. **Dividends:** the fund generally does not receive the index's dividends. ## What about deposit insurance and government backing? Treasury bills are direct obligations of the U.S. government. A buffer ETF is an investment fund, not a bank deposit; FDIC insurance does not cover ETFs, mutual funds, stocks or bonds, even when bought through a bank.[3] ## How are they taxed? Treasury bill interest is taxed as ordinary income at the federal level each year and is exempt from state and local income taxes. A 100% buffer ETF typically pays little income; its results usually come through share price changes, generally taxed as capital gains when shares are sold, though option activity can produce distributions in some years. The timing and character can therefore differ, which matters in taxable accounts. Tax treatment depends on individual circumstances. ## Who considers each? **Treasury bills** suit cash reserves, money needed at a specific date and investors who want a known return. **100% buffer ETFs** may suit investors who would otherwise hold cash but want a chance at equity gains, can hold for the full outcome period and accept that a flat or falling year may return slightly less than zero after fees. Our article on [buffer ETFs versus cash](https://www.vistashares.com/buffer-etfs-vs-cash/) compares standard buffers with cash. More buffer articles and tools are in the [Buffer ETF Guide](https://www.vistashares.com/buffer-etf-guide/). ## Frequently asked questions ### Can a 100% buffer ETF lose money? Yes. The buffer applies before fees and only for investors who hold from the start to the end of the outcome period, so expenses can produce a small loss in a flat or falling year. Investors who buy or sell mid-period can experience larger gains or losses. ### Why are caps on 100% buffer ETFs low? Absorbing all index losses requires put options covering the full decline, which the fund pays for largely by giving up upside. The cap tends to track short-term interest rates, since the fund is in effect trading the interest it could earn on cash for a share of index gains. ### Are Treasury bills risk free? Treasury bills are backed by the U.S. government and are widely treated as having very low credit risk. Their value can change slightly before maturity as rates move, and their fixed return can lag inflation. Held to maturity, they pay their face value. ### How are Treasury bills bought? Investors can buy them at auction through TreasuryDirect or through a brokerage account, either at auction or in the secondary market. Many money market funds and Treasury bill ETFs also hold them. ### Which has better after-tax results? It depends on the investor's tax situation and the market outcome. Treasury bill interest is taxed as ordinary income each year but exempt from state and local tax. Buffer ETF gains are generally taxed when shares are sold. A tax professional can help compare the two for a specific situation. ### Do 100% buffer ETFs receive the index's dividends? Generally not. They gain index exposure through options on the price return of the index, so the index's dividends are not passed through. That is part of the cost of the structure. ## NOTES - U.S. Department of the Treasury, Bureau of the Fiscal Service, TreasuryDirect, "Treasury Bills," accessed November 2026, https://www.treasurydirect.gov/marketable-securities/treasury-bills/. - FINRA, Regulatory Notice 22-08, March 8, 2022, https://www.finra.org/rules-guidance/notices/22-08. - Federal Deposit Insurance Corporation, "Understanding Deposit Insurance," last updated April 1, 2024, https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance. ## IMPORTANT INFORMATION This material is provided for educational purposes only. It is not investment, legal or tax advice, and it is not a recommendation or an offer to buy or sell any security. Information is drawn from sources believed to be reliable as of the date of publication, is not guaranteed as to accuracy or completeness, and may change without notice. Figures attributed to third parties are their estimates. Projections and forecasts are not guarantees of future results. Investors should consult their own financial, legal and tax professionals before making investment decisions. Investments involve risk, including possible loss of principal. Strategies that use options involve additional risks, including limited participation in market gains, the risk that options do not perform as intended, and changes in distributions. Tax treatment depends on individual circumstances and on current law, which may change.