Seeking High, Stable Income? 13.94% Potential Distribution On CAIE: Calamos Autocallable Income ETF

This episode is sponsored by Calamos. 13.94% distribution rate from CAIE, the first autocallable income ETF in the US retail market, as per May 31st, 2026. Autocallables are no longer for just the wealthy. Could CAIE (Calamos Autocallable Income ETF)  that seeks to generate high, stable monthly income be something for your portfolio? Here's what we'll be covering today:

1 - What are autocallables and what are their risks? 
2 - How does CAIE generate its distributions? 
3. What’s our personal opinion on CAIE? And might this autocallable ETF be something for you to consider (or not)? 

📢 Email jennifer@diamondnestegg.com and we’ll send you Calamos' exclusive autocallable playbook and connect you directly with our trusted contact at the firm who can help you with customized solutions for your client portfolios or visit https://www.diamondnestegg.com/calamos  

💰 Supercharge your income this year 👉 Join our exclusive VIP Investment Club and be the first to know about top rates, higher-yielding investment opportunities and members-only conversations and content: https://www.diamondnestegg.com/vip-member-community-info

📢 More information on CAIE and full statutory disclosures can be found under https://www.calamos.com/funds/etf/calamos-autocallable-income-caie/  and https://pex.broadridge.com/summary.asp?doctype=spro&cid=calamos&fid=12811T571

👉  Most recent 19a: https://www.calamos.com/globalassets/media/pdfs/distributions/calamos-autocallable-income-etf-19a-notice.pdf

 📢 Member-requested CAIE video from 2025: https://youtu.be/kX5s-9DY4rI

Transcript

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13.94% distribution rate from CAIE or CHI, the first auto-callable income ETF in the US retail market, as per May 31st, 2026. Could this ETF that seeks to generate high stable monthly income be something for your portfolio? Hello, Diamond Nestec members, Super Savers and Course fans. I hope you're healthy and well. So, seeking high stable monthly income potential and favorable tax treatment were the top two features that Calamos highlighted last June when it launched the first autocallable income ETF in the US under the ticker CAIE, which Calamos pronounces as CHI. Today's video is sponsored by Calamos. And KI was aiming high indeed, because this weighted average coupon of 14.6% was what CHI showed on its website back in July 2025, a month after its launch. It represents the weighted average coupon of CAI's underlying index, the Mercube US large cap Vol Advantage Auto Callable Index, or autocallable index for short, which we will talk more about later. And this is what we mean when we use the term weighted average coupon in today's video. It's important to note that this weighted average coupon is not representative of the actual distribution rate of CHI. So, this attractive weighted average coupon shortly after CHI's launch in 2025 piqued the interest of both retail investors and advisors looking for potential higher yielding alternatives for their clients' portfolios, including some of our VIP investment club members who wanted a deeper dive into autocallables, how they work, and how Kai was able to generate such potential high-stable monthly income. I've linked this original member requested Kai video below for those of you who might be interested, because some in our Diamond Nested community did actually end up buying Kai, and it seems they were not alone. Because fast forward a few months later, and we can see that Kai has already grown to more than $1 billion in assets at the time of this taping on June 20th, 2026, according to Morningstar. Let's take a look now at how early investors in Kai would have done. So at the time of this taping on June 20th, 2026, and according to Yahoo Finance, since its launch, Kai has paid a dividend of more than 30 cents per share every month. And if we take Kai's most recent distribution, annualize it, and express it as a percentage of the fund's current market price per share, we get to this historical distribution yield of 13.94% that Calamos shows on its website. If we had to guess, we would say that early investors in CHI would probably not have been disappointed so far if they were looking for a high stable monthly income. But past performance is no guarantee of future results or outcomes, as our regulars know. So with that in mind, here are the three topics that we'll be covering today. 1. What are autocallables and what are their risks? Auto callables have been popular with high net worth and ultra high net worth investors for a while. So here we'll talk about the basic idea behind autocallables, including their risk and return elements. Two, how does KI generate its distributions? In particular, we'll look at how CHI's underlying index, the Mercube US Vol Advantage Auto Callable Index, also known as the Auto Callable Index for short, works. This is one section you won't want to miss if you're seriously interested in the income potential of CHI's autocallable strategy, either for yourself or maybe for a loved one or a client whose portfolio you're managing. Please note that the underlying Mercube index is not representative of CHI. And three, what's our personal opinion on CHI? And might this auto-callable ETF be something for you to consider or not? Now, if at any point in time you want a deeper dive into CHI and how it makes autocallable strategies accessible for almost everyone, the autocallable revolution that we're currently living through, as some call it, email us at jennifordiamondnestec.com and we'll send you Calamos's exclusive autocallable playbook and connect you directly with a trusted contact at the firm. Auto callables are not for everyone, but for the right investor or advisor, Kai seeks high stable monthly income along with liquidity, tax efficiency, and possibly less hassle than traditional autocallable notes. However, as we always say, where there's the potential for high returns, there will also be appropriate risks that you need to accept. So let's dive in now, folks, and see if you're that right investor or advisor. What are autocallables and what are their risks? As I touched upon earlier, autocallables are not a new invention. They've been around since the early 2000s in Europe and Asia as a popular instrument for income-seeking investors and are also a well-established $100 plus billion dollar asset class in the US. However, in our country, they have traditionally been offered mainly to high net worth and ultra-high net worth investors in the form of unlisted notes that are not liquid. When CHI launched in 2025, it was the first ETF to make autocallables liquid, tradable on an exchange, and easily accessible. How would you describe autocallables in a sentence? Calamos formulates the sales pitch for autocallables as follows. Think of it like a bond whose income and principal depend on the stock market not falling too far. And if you look more closely at the risk profile, you could also say that an autocallable basically makes its buyer, the investor, an insurer against a steep drop in the stock market. You get the nice coupon almost like an insurance premium that an insurance company would get. But you also could stop collecting the coupon or even lose some or all of your invested capital if the market suffers a black swan event and falls by more than a predefined percentage. Plus, your upside is capped. You may collect the ongoing coupons, but there will not be much in terms of principal gains, if any. In the markets, the position of an autocallable investor is often described as that of the seller of a long-dated put option for those of us who are familiar with the concept. Let's walk through an autocallable example to show you what we mean, because it's not exactly intuitive or straightforward for many investors. And we'll use this coupon and autocall mechanism overview from Mercube, the firm that calculates the indices that CHI is based on. Mercube is a financial technology heavy firm that was founded as an index specialist in 2019 and is headquartered in San Francisco, and they play a central role in CI, as we'll see throughout this video. So here's the chart we took from Mercube to show you the several possible outcomes and scenarios that could play out over the lifetime of an autocallable investment. This is an example for an index-based autocallable, and it is an illustrative example meant to show you how it works in principle, even though the key features, such as the no-call period of one year, the five-year or 260-week maturity, and the 100% and 60% barrier levels, are the same as for the actual auto-callables that underlie CHI. This light green line shows the reference index for this autocallable note. For its reference index, CHI uses the Mercube US Lodge Cap or Volatility Advantage Index, which in turn is based on the SP 500. Auto callables are generally issued at par, meaning this green lined reference index is at 100% on day one. And this 100% is also the autocall barrier, the dark blue line here. The autocallable has a no-call period of one year, meaning that it will not be automatically called for the first year. After the one year mark, however, the autocall feature sets in, and if the index is above 100% at the one year or 52-week mark, the note is called. The investor gets the full principal back plus the coupon for the first year, but now has to find the next investment at whatever the current market conditions will be, exposing him or her to reinvestment risk. If on the other hand the index is below 100% at the 52-week mark, the note will not be called. But with the no call period of one year expired, there will now be regular observation dates going forward. For example, monthly in our case. And whenever the index will be above 100% on one of these observation dates, the note will automatically be called and the investor will get back the principal plus any outstanding coupons. Of course, this again creates reinvestment risk for the investor. But why you may ask is the auto-callable terminated early just when it looks more attractive to the investor, paying a potentially high coupon while being safely away from the loss zone? Well, the reason for this is of course that the whole point of paying the high coupon on the autocallable is for the issuer to ensure to share some of the losses if the index falls. But if the index is going up, then the issuer doesn't need the insurance and will not want to keep paying the high coupons to the investor. So that explains the auto-call feature if the index moves above 100% after the initial one-year or 52-week no-call period is over. And this short blip here on the chart, where the index goes above the 100% for a short period of time, this is there to show that the note only gets auto-called if the index is above 100% exactly on one of the monthly observation dates. If the index is above 100% just for three weeks or so in between two of the monthly observation dates, nothing happens. The note will not be automatically called even after the first year, but continues to pay the coupon as long as the index stays between 60% and 100% in our example. But why these two percentages? Now, we already know that the note will be called early if the reference index is above the autocall barrier of 100% at any observation date from now on. However, there is another limit to consider the coupon barrier, the line in light blue here that is set at 60% of the index value in our example. If the index value falls below the coupon barrier of 60% on any observation date, no coupon is paid for this period, like at this downside point here that falls exactly on one of the observation dates. However, coupon payments will usually resume once the index value rises above 60% again at the next following observation date. The reason for the non-payment of the coupon if the index falls below the coupon barrier is that at this point, the first step of the downside protection for the issuer kicks in. The index is now below 60% of its initial value, and the issuer is sitting on some unrealized losses and not having to pay the often high coupons anymore, is the first mechanism that helps mitigate the potential loss for the issuer. Of course, it's the opposite for the investor in the autocallable. Just as the index gets into danger territory, the coupon payments stop coming. But that was part of the initial bargain. Note that we haven't spoken about potential losses on the principal yet. We're getting to these now. Every autocallable has not just a coupon barrier, as we just discussed, but a principal barrier as well. In our example, the principal barrier is set at 60%, exactly the same level as the coupon barrier here, but they could be different percentages as well. The principal barrier is in most cases, such as in our example, not really relevant during the lifetime of the autocallable. Even if the index falls below the 60% during the life of the note, nothing really happens to the principal. Now, the coupons may stop coming if the index falls below the coupon barrier, as we just discussed. But the principal barrier is in most cases only really relevant at maturity, after the full 260 weeks or five years. So at maturity, there are really two possible outcomes for the principal repayment, and it's binary. If the index value is above the principal barrier at maturity, the 60% in our example, the investor gets back 100% of the principal, regardless of the actual value of the index. In other words, all losses in the index above the principal barrier are the issuers, and the investor in the autocallable does not share. However, if the index falls below the principal barrier, all the losses will be borne by the investor in the autocallable. The principal repayment will only be equivalent to the index value. So for example, if the index falls to 45% of its initial value at maturity, the investor of the autocallable will only get back 45% of the principal and has to carry the entire loss of 55%. And of course, this scenario is the ultimate reason why the issuer would have been paying the autocallable coupon in the first place, to be protected against principal loss in the case of a severe market downturn. And in the worst case, if the index were to fall to zero, the entire principal would be lost for the investor in the autocallable. So that's how an autocallable works. In the best case, in our example, if the reference index does go down a bit, but not too low, essentially staying between 60% and 100%, the investor gets regular coupon payments in cash for the full five years and then the entire principal back. And if the index does well and goes above 100%, the note gets called early, but the investor gets back the full principal plus any outstanding coupon payments. But in the worst case scenario, if the index were to drop below the coupon barrier of 60% at the first observation date and then goes down to zero at maturity, the investor could basically lose his or her entire investment. There would be no ongoing cash payments as long as the index remains below the coupon barrier. And there would be only a partial or worst case, no repayment of principal at maturity below the principal barrier. So that was an autocallable example using CHI's reference index, the Mercube US large cap vol or volatility advantage index. Overall, this means that an auto-callable may be one of these investments that may be a bit binary. While they look good, they look really good. But if they go bad, they can go really bad. It's important to note though that CHI, via its underlying index, its auto-callable index, the Mercube US large cap Vol Advantage Auto Callable Index that we mentioned towards the beginning of this video. So CHI via its underlying index is not exposed to just one autocallable, but to a portfolio of at least 52 individual autocallables that mature one week apart. For fixed income regulars, the easy way to think about this is that via its underlying index, CHI basically ladders exposure to individual autocallables on a weekly basis, like how some of you ladder your T-bills. And just as laddering T-bills helps you diversify your interest rate and reinvestment risk, this diversification over time from laddering exposure to 52 or more individual autocallables that mature weekly can to a certain extent mitigate the overall risk profile of CHI. Remember, both coupon payments and principal repayment are only ever lost if the index is below a barrier exactly at one of the observation dates. So as long as it doesn't last too long, even a sharp downturn should only affect a limited number of the autocallables in the underlying index, but keep the remaining trades intact. So if you're comfortable with this risk profile and are looking for an investment that seeks high stable monthly income, that may also add elements of liquidity and tax efficiency. More on the latter two elements shortly. And you don't want to manage 52 or more individual autocallables that mature weekly on your own, either for yourself or for a client. Email us at jenniferdiamondnestic.com and we'll send you Calamos's exclusive auto callable playbook and connect you directly with a trusted contact at the firm. And let's move on now to the next part of today's discussion. How does Kai generate its distributions? Since its launch in June 2025, Kai has already won three industry awards. Most innovative product from SRP Americas, 2025 Deal of the Year from SPI Americas, and Fund Innovation of the Year from With Intelligence, which is now a part of SP Global. So let's dive deeper here so that you can understand what you might be buying either for yourself, a loved one, or a client, and what makes CHI so cutting edge. Or you may decide in the end that it may just not be for you because it doesn't suit your risk return profile. So CHI, the Calamos Auto Callable Income ETF, seeks to generate high monthly income through exposure to a portfolio of autocallables. CHI does not own any autocallables directly, however, but uses derivatives like swaps to build its exposure. The process is complex, but ultimately aims to deliver the coupons and market values of the underlying autocallables to the ETF and ultimately to the investor. We'll discuss how that works in a bit more detail later. So one of the key numbers to understand for potential investors is this 13.98%, the weighted average coupon of all autocallables in the Mercube Auto Callable Index as of the last observation date. The last observation date at the time of this taping is April 30th, 2026. Now, this weighted average coupon is down a bit from where it was right after the launch last July, but it remains attractive in today's environment. Do note that for the rest of this discussion, we will mostly use a rounded 14% for the weighted average coupon. Let's dive deeper now to see where this 14% weighted average coupon of Kai's underlying index, the Mercube Auto Callable Index, comes from. We'll simplify it a bit here, but in principle, the 14% weighted average coupon that Kai's underlying index shows currently is made up of three key components. Let's assume that we're working with a par value of $100 for this illustration. The first part comes from what we refer to as the autocallable premium for the market risk that you take. Basically, it's compensation for the fact that your coupon and principal repayment depend on how the market does. The auto-callable premium is calculated based on options pricing theory. More on this shortly. In this illustration, the autocallable premium makes up about 6.35 percentage points of this 14% weighted average coupon that CAI's underlying index shows. Moving on now to the second part, which is a decrement applied by CI's reference index, the Mercube US large cap vol or volatility advantage index, abbreviated MQUS LVA. Decrement is just a technical or fancy way of saying a deduction from the index. This decrement makes up about six percentage points of this 14% of the weighted average coupon. So 6.35% from the autocallable premium plus 6% from the decrement on the MQUS LVA gets us to about 12.35 percentage points of this 14% here. Which means that the third part is about 1.65% to get us to this 14% here. This third part is basically the interest earned on the collateral for the derivative that underlies CHI. We'll talk more about where this third part comes from later also. For now though, let's focus on the auto-callable premium in the first box. And to do so, we need to go back to this green line here from the previous chart in this video, the Mercube US large cap fall advantage index reference index, or MQUS LVA. Recall from earlier that the MQUS LVA itself is ultimately based on the SP 500, and as most investors know well, the SP can be quite volatile on any given day, week, or month. So, how is it that CHI can seek high stable monthly income when it's exposed to the SP 500's constant ups and downs? Well, the answer is that while the reference index, the MQUSLVA, uses the SP 500, the e mini SP 500 futures contract to be precise, as its starting point, it makes two modifications to help smooth. out the ups and downs in order to seek high stable monthly income. The first modification is that the MQUSLVA has a fixed volatility target of 35%. In other words, the likelihood that the index will move by 35%, either up or down, should always be 68% or one standard deviation on an annualized basis. And this is important because managing the volatility helps to keep the autocallable premium more stable. This illustrative 6.35% from earlier. Let's talk through this a bit because it's not always straightforward. Recall from the previous section that the position of an autocallable investor is often described as that of an insurer against a steep and potentially long-lasting market downturn. Or put another way, if you were pessimistic about the market and you did believe that a black swan event was lurking around the corner so to speak, you probably wouldn't want to insure someone else against it in the first place. This position of a fundamentally optimistic insurer is basically that of the seller of a long dated put option in market terminology. And that's why this autocallable premium can be calculated using options pricing formulas. And volatility is one of the main drivers in options pricing theory. So all else being equal when the SP 500 is super volatile options prices generally go up meaning that this autocallable premium that you receive may also likely go up. And when the SP 500 goes through more quiet, stable patches, options prices generally go down, meaning that this autocallable premium that you receive may also likely go down. Now historically the volatility of the SP has fluctuated quite wildly the long-term average is in the 15 to 18% range but it has seen peaks in the 70s and higher during acute market stress and lows in the 10s when the future looked just golden. Setting the reference index at a fixed volatility target of 35% helps to keep this autocallable premium more stable because what happens is that during good times when volatility is low and options prices are low, meaning autocallable premiums are also low, leverage may be used to take on more risk, to buy more options so to speak, to get to this illustrative autocallable premium target of 6.35% here. This MQUSLVA essentially allows for up to five times leverage in good or quiet times. At the time of this taping on June 20th 2026 the leverage level stands at about 2 roughly in range with its long-term historical average range of 1.8 to 2. During bad times when volatility is high and options prices are high meaning autocallable premiums are also high leverage may not be needed to get to a stable premium for every new autocallable and may even be reduced to zero. So to recap, that was the first modification that the MQUSLVA as a reference index makes to the SP 500 index. It has a fixed volatility target of 35% that it manages against basically by adding or taking away leverage in order to keep this illustrative autocallable premium target of 6.35% here more or less stable. The second modification that the MQUSLVA makes is a decrement this second box here. As Mercube says a 6% per annum index deduction is applied daily to the index return which equates to about 1.6 basis points per day. So this 6% per annum index deduction basically aims to convert the prospective long-term gains on the SP 500 into payouts in order to seek regular stable monthly income. Meaning that from an economic perspective the decrement has the same effect as if you were selling 6% of the SP assets in your portfolio every year and paying yourself the resulting cash to get to a higher income. This is not a cost of the ETF. Now because the underlying index tracks the SP 500's equity risk at its core the hope is that the markets would on average produce a 6% return every year. So in the long run you would essentially convert the market gains into cash payouts but keep your initial investment stable. So let's see how that might have worked out historically. This chart illustrates back testing for the performance of CAI's underlying index the Mercube US large cap full advantage autocallable index or autocallable index over 20 years from 2005 to 2025. Remember this underlying index packages at least 52 individual autocallables into one trade so to speak and is the mechanism that CHI uses to get its exposure to autocallables. So in this illustrative example the orange line here basically shows the price of the autocallable index if you want the closest equivalent of its share price if an index had one and you can see that it stayed roughly stable. The gray line up here shows the total return of the autocallable index how the index might have developed for an investor who would have immediately reinvested all cash distributions in the index so to speak and this space here that's in between the orange line here again basically the price of the autocallable index and the light gray line here its total return this difference represents the cash payouts that you might have received as part of the total performance. You can also see that the total return of the autocallable index would have tracked the total returns of the SP 500 the blue line quite closely this illustrates one of the main arguments for CHI's underlying index. It would have distributed or paid out a large proportion of its gains in cash to investors in line with its aim of seeking high and stable income but it would have historically produced almost the same total return as the SP 500 while keeping its price roughly stable which might not be a bad outcome if you're seeking income but are less concerned about capital growth. Keep in mind that the performance shown is that of the Mercube index not CHI investors cannot invest directly into an index. Plus as always past performance is no predictor of future results or outcomes. But let's go back to our illustration there were also times when the gray line for the autocallable index's total performance would have diverged notably from the blue line the total return on the SP 500 this goes back to the two modifications that Mercube applies in its index versus the SP 500 as we just discussed. The use of leverage in particular means that during some periods the autocallable index might have shown higher total returns than the SP 500 while during other periods it was the other way around and the total return of the autocallable index might have fallen more than the SP 500. And the individual autocallables that are packaged up in the autocallable index so to speak may have broken the barriers a bit earlier or a bit later than the SP 500 itself depending on the exact leverage and circumstances which may be hard to predict in real time for the average investor. But remember the fact that the overall autocallable index provides laddered exposure to at least 52 individual autocallables in weekly intervals allows for some time-based diversification in its portfolio as we discussed before at least so long as downturns don't last too long which brings us to the next point. As we said before CHI doesn't really own 52 or more autocallables but trades one single index the Mercube US large cap Vol Advantage Auto callable index which packages all the underlying autocallables into one single instrument. One trade is just much easier to manage than 52 or more individual laddered positions as the advanced investors and advisors in our community who manage just a handful of autocallable notes can attest to. So far so good. But as we also mentioned before CHI doesn't invest in the overall index directly either rather it trades it in the form of derivatives mostly a total return swap with JP Morgan as the only counterparty. This derivative structure is the reason that CHI has to hold collateral against its potential obligations from the swap and also why it earns a bit of interest on that collateral that's this illustrative 1.65% here the third key component that makes up the weighted average coupon that we discussed earlier. And if you want to learn more about total return swaps drop a comment below and we'll add it onto a list of future videos if there's enough interest. If on the other hand you're an individual investor who's interested in autocallables that before CAI's launch last June were only really accessible to high net worth and ultra high net worth investors or you're an advisor who's looking for an investment opportunity that seeks high stable monthly income with liquidity and tax efficiency elements. And you don't want to spend all your time and effort managing individual autocallable notes email us at jenniferdimondestic.com and we'll send you Kalamos's exclusive autocallable playbook and connect you directly with our trusted contact at the firm. So now that we understand where CAI's distributions ultimately come from autocallable premiums, decrements and interest on collateral holdings I should mention one more key argument for tax conscious investors. The total return swap with JPMorgan is structured in a way that it potentially delivers most of the gains from the autocallable strategy as return of capital. For example in 2025 88% of CHI's coupons were paid out as potentially tax deferred return of capital. Essentially they may have come tax free when paid to you only the interest on the collateral that CHI held may have been subject to ordinary income tax. Do note however that the return of capital counts against your cost base and when you ultimately sell your CHI shares you'll be taxed on all capital gains. But if you hold your position long enough it may be at the more advantageous long-term capital gains tax rates. This is a clear advantage versus a direct autocallable whose coupon payments may mostly be taxed as ordinary income when paid. Please remember that we are not tax advisors so do consult with your trusted tax advisor to see how CAD's potential tax efficiency may impact your personal situation. In addition return of capital and options premiums are generally not included as part of the SEC yield calculation. So any 30-day SEC yield numbers that you see may be significantly lower than the weighted average coupon for the underlying Mercube autocallable index andor the distribution rates for CHI that we've been discussing in this video as those numbers include all distributions including return of capital and options premiums unlike the SEC calculation. So CHI is clearly complex and it does take a fair bit of time and effort to understand the whole construct. But as I mentioned at the very beginning of this video while autocallables are not for everyone for the right investor or advisor CHI can be an investment that seeks high stable monthly income along with liquidity tax efficiency and likely less administrative hassle than plain vanilla autocallable notes which is a nice segue into the next part of today's discussion. What's our personal opinion on CHI? And might this autocallable ETF be something for you to consider or not? As we've discussed today the basic principle of CHI like for all autocallables is that you as the buyer provide insurance to someone else against a steep market drop in this case of the SP 500. In return you receive a potentially nice coupon as long as everything goes well for example like this 13.94% distribution rate that CHI shows on its website at the time of this taping. But if markets were to drop sharply and stay down for a longer time like they did during the great financial crisis of 2008-2009 for example then you may lose both your regular coupon as well as your principal repayment at maturity the very worst case is a total loss. Morningstar has run a backtesting analysis on the reference index that Kai uses the Mercube US large cap fall advantage index that we discussed in depth before and found that over the past 20 years the loss numbers might have looked much better than the theoretical worst case. The average principal returned was 99.56% for the coupons though there was a bit more downside. While 88.51% of all monthly coupons would have been paid 11.49% of monthly coupons would not have been paid because the index would have fallen below the coupon barrier on an observation date. Not surprisingly a closer look also reveals that most of these unpaid coupons and principal losses would have happened during the great financial crisis of 2008-2009 when the SP 500 fell 57% from peak to trough. Morningstar concludes based on historical index data it's unlikely for coupons not to be paid as planned and very unlikely for principal to not be paid back in full. Prolonged bear markets are the strategy's Achilles heel. It should always pay some coupon but that coupon level may dip unexpectedly should the index fall sharply and stay at severely depressed levels. Further if it stays at those low levels for five years investors will suffer a loss in addition to diminished coupon payments. Please keep in mind here again that the backtesting was done on the Mercube index not CHI investors cannot invest directly into an index. Plus as always past performance is no predictor of future results or outcomes. So with those observations in mind who might want to take a closer look at CHI in our personal opinion you may want to potentially consider CHI if you check all five of these boxes. You're looking for high stable monthly income potential that may come with a possible high percentage of tax deferred return of capital distributions. You understand that CHI's payouts are ultimately derived from equity risk and appreciate that this may potentially diversify your income sources. For instance in addition to treasuries other types of bonds and annuities you understand that CHI's coupon the income stream is not guaranteed and you don't have to rely on it to cover essential expenses for example because you have income from other sources whether that may be from Social Security a company pension or again bonds annuities etc and you can also accept that you could lose a part or in the worst case all of your principal the way CHI like any autocallable investment is structured your losses will be highest exactly when everything around you will look very bleak anyway because the market is experiencing a sudden sharp and prolonged downturn. You're open to financial innovation and don't mind that CHI does not have a long track record yet. Perhaps you're someone who may even find it exciting to invest in or recommend the first autocallable ETF launched in the US and you're open to derivatives and the largely virtual or synthetic setup of CHI. You may also take comfort in the fact that autocallables are already a well established 100 billion plus dollar asset class in the US and that JP Morgan has been using the same MQUSLVA index for some of the autocallable nodes that it sells directly to its own high net worth and ultra high net worth clients. Now let's look at the flip side and talk a bit about who might not want to take a closer look at CHI CHI might not be for you if you take one or more of these boxes. You're looking for growth CHI is not designed to do that and its upside is essentially capped by the coupon. Now CHI is of course not a bond but like for bonds there's no real growth potential for the principal with CHI. You're looking for certainty and downside protection. While CHI is designed to seek a high and stable income in a wide range of market scenarios there are no guarantees and a sudden sharp and long lasting market downturn may stop coupon payments and also lead to a partial or in the worst case total loss of your invested capital as we discussed earlier. You don't like the leverage andor the 6% annual decrement that KI's reference index may employ as these may under some circumstances potentially increase the likelihood of a barrier breach compared to the SP 500. You're not comfortable with the highly structured mostly virtual setup of CHI KI doesn't own any autocallables directly but depends on a multi-layered synthetic derivative structure that's not always easy to understand, carries counterparty risk and is hard to monitor even for the most sophisticated investor. At the end of the day you will have to trust that Calamos, Mercube and JPMorgan will stay around and do the right thing. You don't understand chi andor it will keep you up at night for any other reason. This one's pretty much self-explanatory as our Diamond Neste regulars hear me say often sometimes that extra yield is just not worth it if it'll keep you tossing and turning in bed or scratching your head more often than you'd like. So Marcus and I don't own any Kai at the moment and the main reason for this as many in our diamond nested community know is because we are still very much looking for growth in our portfolio meaning this box here applies to us for now. That said if we were closer to retirement and looking for high stable monthly income potential we would certainly consider adding some Kai to our portfolio because at that point in time we would check all five of these boxes here that would make us prospective CHI investors. Now we wouldn't put all of our money in Kai as I often say it's never all or nothing. Plus having all your eggs in one basket is rarely a good idea. But again that's us and everyone's financial journey is different. What do you think about Kai and would you buy it? What questions do you still have? Drop a comment below and let me, Marcus and the rest of the community know or email us at jenniferdiamondnestec.com and we'll send you Kalamos's exclusive autocallable playbook and connect you directly with our trusted contact at the firm. Alright Diamond Nestec member Super Savers and Course fans I hope you enjoyed today's video and learned something new and see again very soon either in our VIP member zone or here with more brand new wealth building content for your financial journey.