Buffer ETF payoff chart
See the whole shape of a buffered outcome, from deep losses to strong gains, for any buffer and cap you choose.
Visual guide
The whole payoff at a glance
Gray: the index. Purple: the buffered outcome over one full outcome period.
Hypothetical illustration before fees and expenses, held for the full outcome period. Not the terms or performance of any fund. A buffer reduces, but does not eliminate, losses.
How it works
A payoff chart plots the outcome over one full outcome period against the index return. A standard buffer gives a curve with three parts: a flat stretch at the cap on the right, a flat stretch at zero inside the buffer, and a line that falls one-for-one with the index once losses pass the buffer.
Formula. Outcome = the lower of the index return and the cap when the index rises; zero while the loss is within the buffer; and (index return plus buffer) once losses go beyond it. The "about half" setting shows a design where only part of the losses beyond the buffer pass through.
Worked example. With a 15% buffer and a 15% cap, an index return of minus 30% maps to minus 15%, minus 10% maps to 0% and plus 25% maps to 15%. Hypothetical, before fees and expenses.
Assumptions. Held for the full outcome period, before fees; not the terms of any fund.
FAQ
Frequently asked questions
What does a buffer ETF payoff look like?
It follows the index up to the cap, stays at zero while losses are within the buffer, then falls with the index once losses pass the buffer.
How is a deep buffer different?
A larger buffer extends the flat zero section further into losses. It usually comes with a lower cap, because a larger buffer costs more and is paid for by selling more upside.
Why is the payoff only valid at the end of the period?
The options that create the buffer and cap reach their full payoff on the last day of the outcome period. Before then their values depend on time, volatility and interest rates.
Is this the payoff of a real fund?
No. It is a simplified illustration. Each fund publishes its own terms and payoff profile in its prospectus and on its website.
Learn more
- Deep Buffer ETFs: What Changes When the Buffer Is Larger?
- Beyond the Standard Buffer: How Do Floors, Dual Directional and Accelerated Designs Work?
- Buffer ETF Terms Explained: Buffer, Cap, Participation Rate, Outcome Period and Reset
- Buffer ETFs Explained
- All ETF calculators and tools
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For educational purposes only. This material is not investment, legal or tax advice, and it is not a recommendation or offer to buy or sell any security. Figures from third-party sources are believed to be reliable as of the dates shown but are not guaranteed. Investments involve risk, including possible loss of principal.