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The More Things Change…

Eli Pars, CFA

Summary Points:

  • Calamos Hedged Equity Fund benefited from the rising equity market during the second quarter and through the first half of 2024.
  • The fund’s performance year-to-date aligned with our objective of capturing S&P 500 upside with less exposure to downside.
  • The 65/35 option trade that we put in place in the second half of last year remains attractive, in our view.

Learn more about the three pillars of CIHEX.

  1. Seasoned options expertise
  2. Track record of downside risk mitigation
  3. Seeks to avoid sacrificing upside participation

As an equity alternative, Calamos Hedged Equity Fund employs an active options-based strategy to seek upside participation in the equity market while limiting downside exposure. Given the uncertainties in the market and the potential for the unexpected, we are dedicated to being favorably positioned for as many market outcomes as possible.

We believe this flexible approach is a key differentiator and one of the most important ways we add value over time for the fund’s shareholders. That said, while there are times when we are really active in terms of adjusting our hedge, there are other times when we establish a trade that we really like and the dynamics in the market give us every reason to keep that trade going.

That’s where we are today. As we head into the second half of 2024, our outlook on the current 65/35 trade is that “if it’s not broken, why fix it?” To recap, last year, market conditions provided us with the opportunity to establish an especially attractive option trade structured to pursue 65% of the market’s upside with just 35% of the market’s downside at its expiration in December 2024. (For more on this trade, see our post, “Focused on Capitalizing on—Not Capping—Equity Upside” and “CIHEX Set to Capitalize on What We’re Calling a “Cicada Trade.”)

For the most part, we’ve kept the trade fairly steady, although not completely static. As markets move, the 65/35 trade may be less advantageous for new money entering the fund. Consequently, we did tweak the hedge a couple of times this year as the equity market continued to rally.

While the 65/35 trade has served us well, we are always looking to the future and the many different scenarios that may evolve. We are confident that our active and flexible approach, combined with our decades of experience, will position us well to take advantage of whatever the market brings.

CIHEX: A History of Capturing Equity Upside, Managing Downside Volatility

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.

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, 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 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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