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Hedging When the Price Is Right
October 1, 2026
Summary Points:
- Calamos Hedged Equity Fund (CIHEX) uses a dynamic options strategy to participate in equity market appreciation while limiting exposure to drawdowns.
- The fund advanced 1.64% in 3Q, capturing 71% of the S&P 500 Index’s 2.30% gain.
- Our current base hedge is a December 2027 structure built to deliver 60% to 65% of the market’s upside and 35% to 40% of its downside over its full life (we refer to this as our “65/35 profile”).
- Unlike some other hedged equity strategies, our approach is flexible, and we change our base hedge as opportunities emerge. At the margin, we sold near-the-money calls and bought back out-of-the-money short puts as the market firmed, then reversed those trades as it slipped.
Calamos Hedged Equity Fund (CIHEX)
Morningstar Overall RatingTM Among 141 Equity Hedged funds. The Fund's risk-adjusted returns based on load-waived Class I Shares had 3 stars for 3 years, 4 stars for 5 years and 4 stars for 10 years out of 141, 121 and 63 Equity Hedged Funds, respectively, for the period ended 8/31/2026.
After a pullback in late July and a record high in mid-August, the S&P 500 Index paused in September as the Fed raised rates for the first time since 2023 and the 10-year Treasury yield climbed to its highest level since 2007. Higher rates make the calls we write more expensive and the puts we own cheaper. In addition, lower absolute levels of index volatility and steep put skew enable us to use S&P 500 options to build a 65/35 profile that we believe fits what investors want from hedged equity.
3Q Performance in Perspective
CIHEX’s 71% capture of the S&P 500 Index’s gain was above the upside range of our hedge targets. Those ranges, 60% to 65% of the market’s upside and 35% to 40% of its downside, apply over the full life of the December 2027 structure, so any single quarter can come in above or below them.
Actively Managing Our Hedge
The December 2027 collar is our current base hedge, and we believe the beauty of managing it actively is that we always have the flexibility to act on opportunities without being tied to a fixed expiry or roll schedule. Just as you might stock up when things are on sale at the grocery store, we can add hedge when it gets cheaper or reshape the hedge if the rate and volatility environment favors a different duration or payout.
When the market firmed in late July and early August, calls got richer and puts cheaper, so we sold near-the-money calls and bought back out-of-the-money short puts we had sold, adding hedge at better prices. When the market slipped and hedging costs rose, we reversed those trades, buying the calls back for less than we received and selling the puts again at richer prices to monetize the extra protection. Adding hedge into strength gives up some participation if the market keeps rising. These adjustments are only at the margin, and the participation we would give up does not materially alter our target participation over the life of the trade.
Looking Ahead
We expect rates and the November midterm elections to keep the market moving in both directions. If rates stay high and index volatility remains low, we would consider making our hedge more defensive by adding puts and/or put spreads or by extending the expiry of the base hedge. If rising yields keep weighing on valuations, the puts we own would gain value. We also see reasons for caution, as further Fed increases could pressure equity valuations and narrow leadership, raising the risk of a sharp reversal.
We’ve built CIHEX’s base hedge to manage these risks. Because our approach is flexible and doesn’t depend on calling the market’s direction, we believe the fund can keep delivering what it is designed to—equity participation with less exposure to drawdowns.
Total Return (%) as of 9/30/26
| 3Q26 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | |
|---|---|---|---|---|---|---|
| Calamos Hedged Equity Fund (CIHEX) | 1.64% | 7.36% | 9.21% | 13.74% | 8.34% | 8.42% |
| S&P 500 Index | 2.30% | 12.75% | 15.74% | 22.88% | 13.79% | 15.33% |
Data as of 9/30/26. Source: Morningstar. Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. Please refer to Important Risk Information. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. All performance shown assumes reinvestment of dividends and capital gains distributions. Returns of more than 12 months are annualized. The fund’s gross expense ratio as of the prospectus dated 2/27/2026 is 0.90% for Class I shares.
Average annual total return measures net investment income and capital gain or loss from portfolio investments as an annualized average.
Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-866-363-9219. Read it carefully before investing.
The Morningstar Equity Hedged Category is comprised of funds that use a variety of options trades, including put writing, options spreads, options-based hedged equity, and collar strategies, among others.
Morningstar Ratings™ are based on risk-adjusted returns and are through the month end and for the share class listed and will differ for other share classes. Morningstar ratings are based on a risk-adjusted return measure that accounts for variation in a fund’s monthly historical performance (reflecting sales charges), placing more emphasis on downward variations and rewarding consistent performance. Within each asset class, the top 10%, the next 22.5%, 35%, 22.5%, and the bottom 10% receive 5, 4, 3, 2 or 1 star, respectively. Each fund is rated exclusively against US domiciled funds. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Source: ©2026 Morningstar, Inc.
Diversification and asset allocation do not guarantee a profit or protect against a loss. Alternative strategies entail added risks and may not be appropriate for all investors. Indexes are unmanaged, are not available for direct investment, and do not include fees and expenses.
Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The views and strategies described may not be appropriate for all investors. References to specific securities, asset classes, and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
Indexes are unmanaged, do not include fees or expenses, and are not available for direct investment. The S&P 500 Index is considered a measure of the US equity market. The Bloomberg US Aggregate Index measures the performance of investment-grade bonds. The Bloomberg US Government/Credit Bond Index includes Treasuries and agencies that represent the government portion of the index, and includes publicly issued US corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements to represent credit interests.
The Morningstar Options Trading Category is comprised of funds that use a variety of options trades, including put writing, options spreads, options-based hedged equity, and collar strategies, among others.
Important Risk Information. An investment in the Fund(s) is subject to risks, and you could lose money on your investment in the Fund(s). There can be no assurance that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund(s) can increase during times of significant market volatility. The Fund(s) also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.
The principal risks of investing in the Calamos Hedged Equity Fund include covered call writing risk, options risk (see definition below), equity securities risk, correlation risk, mid-sized company risk, interest rate risk, credit risk, liquidity risk, portfolio turnover risk, portfolio selection risk, foreign securities risk, American depository receipts, and REITs risks.
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