On The Worst Day Of The Year For Stocks, This ETF Hit New Highs

Monday was the worst day of year for U.S. stocks, but dozens of exchange traded funds managed to hit all-time highs. Of course, the bulk of these funds were either new products or fixed income or precious metals funds.

What Happened

One of the notable exceptions to those groups was the actively managed Cambria Core Equity ETF (NYSE: CCOR). Impressively, CCOR jumped 1.25% on volume that was more than double the daily average.

“Under normal market conditions, at least 80% of the value of the Fund’s net assets will be invested in equity securities,” according to Cambria. “The fund intends to invest the remaining value of its net assets in options where pricing provides favorable risk/reward models and where gains can be attained independent of the direction of the broader U.S. equity market.”

Why It's Important

Looking at CCOR's roster of equity holdings, which include 13 members of the Dow Jones Industrial Average, plenty of the fund's components have some export exposure, but CCOR requires closer examination to explain its potential to endure further equity market downside

CCOR “also sells exchange traded index put and call options in an effort to reduce the Fund’s volatility and increase returns,” according to the issuer. “In addition, the Fund also buys index put options, which can protect the Fund from a significant market decline that may occur over a short period of time.”

Considering that selling call options is a essentially a bearish bet as is buying puts, CCOR could prove to be ideally suited for the current climate. Plus, investors don't have to do the options buying and selling themselves.

What's Next

Strategies such as the one put forth by CCOR are likely to lag when markets are steadily grinding higher, but that doesn't mean negative returns. The fund was up more than 3% year to date heading into Monday. Identifying when to use a fund like CCOR is critical to investors' success and it looks like the time is right to evaluate the fund.

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