Tuttle Capital files for five ETFs that would buy default protection on tech debt

ETF Opportunities Trust, which would issue the shares, filed a preliminary prospectus on Nov. 3 for five funds advised by Tuttle Capital Management. The funds would buy credit-default-swap protection on Oracle, CoreWeave and groups of large technology companies. The information is not complete and may be changed, and the funds may not be sold until the registration statement is effective.

On Nov. 2, Oracle filed a prospectus supplement to offer $10 billion of common stock and, at the same time, $10 billion of senior notes. If the offerings are completed, Oracle said the net proceeds would go to general corporate purposes, which may include capital spending, debt repayment, investments or acquisitions, and dividends or share repurchases. S&P Global Ratings that day assigned its BBB- rating to the proposed notes, the same rating it lowered Oracle to in July, from BBB.

How the funds would work

A credit-default swap is insurance on a company's debt. The fund would make periodic payments to a counterparty, based on a set amount of that debt. If the company defaults, or another defined credit event hits, the counterparty usually pays the fund the insured amount minus what the debt is still worth. If nothing goes wrong, the premiums are gone.

The price of that insurance is the credit spread, quoted in basis points. One basis point is 0.01 percentage point. A wider spread is a higher price for the protection. A tighter spread is a lower price, a sign the debt looks safer. These funds are built to gain when the spread widens and to lose when it tightens.

None of the five has started operating. Each seeks capital appreciation. The Tuttle Capital ORCL Credit Default Swap ETF, the prospectus says, "is designed to gain in value when the market perceives ORCL's creditworthiness to be deteriorating, and to lose value when the market perceives its creditworthiness to be improving." It would not own the bonds or the stock.

The other four use the same design on a different list. The Tuttle Capital CRWV Credit Default Swap ETF would reference only CoreWeave. The Tuttle Capital Magnificent 7 Credit Default Swap ETF would reference Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Tuttle Capital Semiconductor Credit Default Swap ETF would reference Advanced Micro Devices, Broadcom, Intel and Nvidia. The Tuttle Capital Hyperscaler Credit Default Swap ETF would reference Alphabet, Amazon, Meta, Microsoft, Oracle and Space Exploration Technologies.

The prospectus says the word hyperscaler is not standardized. It also says Space Exploration Technologies became a public company in 2026, and that swaps on it may be new, thinly traded or unavailable.

Under normal circumstances, at least 80% of net assets, plus borrowings for investment purposes, would sit in those swaps. Tuttle Capital Management intends to keep the amount insured at 5 to 10 times net assets, and to move inside that range with market conditions and liquidity. The funds would not reset that multiple each day.

That multiple is the amount of debt covered. It is not a promise that the fund will move 5 to 10 times as much as the stock.

Value at risk is an estimate of potential loss over a set period, at a given confidence level. Each business day, that estimate may not exceed 200% of the same estimate for the common stock the fund intends to use as its comparison. That caps the fund's measured risk at twice the stock's risk.

The cap limits an estimate, not the loss a shareholder can take. The prospectus says leverage can cause the fund to lose more than an unleveraged position, and that "a sharp tightening of ORCL's spread could cause substantial or total loss."

If no credit event occurs, the fund loses the premiums it pays, "and leverage increases that cost." Over long periods without a wider spread, "the Fund's value is expected to decline."

The CoreWeave fund can lose money even when CoreWeave's shares fall. It is not a bet against the stock. The prospectus says the share price and the credit spread can move apart, so a drop in the shares is not the same thing as a wider spread.

If the shares fall and the spread tightens, the protection loses value, and the premiums still come due. The prospectus says those premiums "may be substantial," because CoreWeave's spread is wider than that of higher-rated issuers.

The Magnificent Seven section says those companies are generally viewed as strong credits, so a credit event may be unlikely.

What is still blank

None of the five has a ticker or a named exchange. The management fee and total annual operating expenses are printed as "0.__", not as a number. Distribution and service fees, and other expenses, are shown as 0.00%, with other expenses described as a first-year estimate. Each fund is classified as non-diversified. Matthew Tuttle, chief executive officer of the adviser, is named portfolio manager.

The cover proposes that the filing become effective 75 days after filing.

What Oracle and CoreWeave protection costs

On Nov. 2, CNBC reported Oracle's five-year credit-default-swap spread at 292, up 265% in one year. The Financial Times, in an article published Oct. 20, quoted the contract at 322 basis points on Monday, Oct. 19, up from 144 at the start of the year. On the measure the Financial Times used for Meta, where 108 basis points costs $108,000 a year to insure $10 million of debt, that October quote was $322,000 a year on $10 million.

CoreWeave is priced differently. About 1,090 basis points would be $1.09 million a year to insure $10 million if the contract were billed like Meta's. It is not. The Financial Times said a buyer of $10 million of protection would pay $1.82 million upfront and $125,000 a quarter. That quarterly payment is $500,000 a year, before the upfront sum.

The prospectus says each fund would make periodic premium payments on the amount insured, that the adviser intends that amount to be 5 to 10 times net assets, and that leverage increases the cost. It describes periodic payments, not an upfront sum.

"Clearly when you're in a market where the risk is very concentrated, what you want to buy is CDS," Jim Caron, chief investment officer of the portfolio solutions group at Morgan Stanley Investment Management, told the Financial Times. He added that the swaps were a "cheap hedge" for investors. The prospectus says these funds' swaps are not intended to hedge any other investment.

Until a later filing names a ticker, an exchange and a fee, there is nothing to buy.