BlackRock’s Amped Up ETF Taps Into Wall Street’s Stock Anxiety

BlackRock Inc. is tapping into a fast-growing corner of the options-powered ETF world with an offering aimed at Wall Street investors bracing for the S&P 500 to tread water.

The iShares Large Cap Accelerated ETF (ticker TWOX) launched Thursday. If stocks notch a gain over the quarter the ETF will offer double the gains of BlackRock’s S&P 500 tracking fund (IVV) — but for the current period those returns are capped at 5.82% after fees. That limit will reset quarterly based on pricing in the options market and, in the event of a selloff, the fund comes with no hedges against losses.

The new ETF joins a booming category — more generally known as outcome-oriented, defined-outcome or buffers — that has exploded to $60 billion from just $5 billion five years ago, data compiled by Bloomberg Intelligence show. TWOX is purely focused on squeezing out extra gains in the event that the S&P 500 posts paltry returns, a rare occurrence in recent years.

As is typical for such ETFs, investors in TWOX are only promised the full protection if they keep their money in the fund for its entire lifespan of a quarter. From there, investors can redeem their shares or roll them into the next cycle. The regulatory filing cautions investors the outcomes sought by the fund are not guaranteed.