Liquid Strategies' new Nasdaq income ETF is selling S&P 500 puts

Liquid Strategies listed its Overlay Shares Nasdaq 100 Income ETF, OVQ, on Cboe BZX on Friday, Oct. 23, and the puts it is selling are on the S&P 500 rather than the Nasdaq-100. On Monday, Oct. 26, the Calamos Least-Of Autocallable Income ETF, CAYN, listed on NYSE Arca. Calamos calls that launch a first. In both launches, the pitch and the structure do not match.

The puts do not protect the stocks

Holdings dated Tuesday, Oct. 27, put 97.01% of OVQ in the Invesco Nasdaq 100 ETF, AQQQM. The income comes from four put spreads on SPXW, which Cboe lists as weekly options on the S&P 500. In a put spread, the fund sells a put and buys another at a lower strike. The premium left over is the income, and the bought put limits how much the sold one can lose.

The S&P 500 closed Monday at 7,676.77. Two of the four sold puts were already in the money against that close, meaning the index was below the strike and those contracts were already losing positions. They are the Oct. 29 put at 7,700 and the Oct. 30 put at 7,800. The 7,800 strike was more than 100 points above the close. The Nov. 2 and Nov. 3 spreads both sell the 7,650 strike, below the close. The bought puts are struck 100 or 200 points lower. That limit covers the spread, not the Nasdaq-100 holding.

The short puts lose if the S&P 500 finishes below those strikes. Nothing in the spread offsets a fall in AQQQM. If both indexes fall, the holding and the short puts can lose together. If the Nasdaq-100 falls and the S&P 500 does not, the overlay does not make up the stock loss.

The prospectus dated Oct. 21 describes the puts as a hedge against a decline in the options' reference asset, an index of large-cap securities, and says the bought puts are not expected to completely protect the fund from a decline in that index. A later risk section names the S&P 500. The fund's page and Friday's launch release say the options derive their performance from the Nasdaq-100.

The all-in fee is 0.97%, a 0.85% management fee plus an estimated 0.12% for the funds the portfolio holds. The fee table has no waiver. The fund targets a 12% annual distribution and does not guarantee it. Liquid Strategies says that rate might be a return of capital, the investor's own money coming back, and that this can erode the fund's value. Net assets were $6.58 million as of Monday.

Defiance's Nasdaq 100 LightningSpread Income ETF, DQLDY, has sought Nasdaq-100 exposure and put-spread income since Sept. 17, 2025. Unlike OVQ, the puts in Tuesday's holdings are on that index: NDXP contracts, which Nasdaq lists as options on the Nasdaq-100. Defiance reported $55.38 million as of Monday and a gross expense ratio of 1.04%.

The income follows the weakest fund

CAYN seeks monthly income from a ladder of notes tied to the weakest of the SPDR S&P 500 ETF Trust, ASPY, the Invesco AQQQ Trust, AQQQ, and the iShares Russell 2000 ETF, BIWM. The fund does not own the notes. A swap pays it their result.

The notes are autocallable, meaning a note can be retired before its term. Each runs three years and cannot be called in the first year. After that, it ends early if the weakest fund is at or above its starting level on a monthly check, and skipped coupons are paid then. The prospectus dated Oct. 14 says that early end can force the money to be reinvested at a lower rate if yields have fallen.

A coupon for a given month depends on the weakest fund being at or above 70% of its starting level. If it is below that level, the coupon is skipped, not cancelled. Unpaid coupons accumulate and can be paid later, once the weakest fund is back above 70%, or when the note is called. If the weakest fund finishes below 70%, that slice takes the loss from the start, not only the loss past 70%. In the prospectus's example, a 45% decline means that slice loses 45% of its value.

Calamos calls CAYN the world's first indexed least-of autocallable ETF, on the MerQube US Equity Least-Of Autocallable Index. The prospectus says the fund is actively managed and will not try to track that index. The swap pays the index's result. That is not the same thing as the fund being an index fund.

Matt Kaufman, Calamos's global head of ETFs, described the approach in the firm's Oct. 19 release as "trading an index on swap, an innovation that the worst-of autocallable strategy has never seen before in the ETF space."

Innovator's Index Autocallable Income Strategy ETF, CACII, has offered exposure to the weakest of the same three funds since it listed on Sept. 25, 2025, through over-the-counter swaps, on a mix of two-, three- and four-year notes. Calamos uses three-year notes, and a test at 70% of the starting level. That is a 30% decline, the barrier Innovator discloses. The three-fund exposure is not new. What Calamos is calling a first is trading that index on a swap.

Innovator reported a market value of $185.9 million as of Monday, and an expense ratio of 0.79%. CAYN had $2.5 million on Monday. Its net fee is 0.74% after a waiver, and the gross fee is 0.86%.