Core Insights - Large-cap tech companies investing heavily in artificial intelligence (AI) are experiencing questionable valuations, leading to increased market volatility, as indicated by a nearly 50% rise in the CBOE Volatility Index (VIX) from mid-August to mid-November [1] - The Fidelity Hedged Equity ETF (FHEQ) is highlighted as a potential investment option for downside protection, utilizing an options-based strategy that incorporates quantitative analysis of various factors for stock selection [1] - The fund aims to provide downside protection while still allowing participation in upward market trends, making it a cost-effective option for investors seeking protection against market volatility [1] Investment Strategy - The options-based strategy employed by FHEQ is designed to address various market scenarios, including changing interest rates and market volatility, providing a math-based approach to investment [1] - Fidelity Investments' representatives emphasized that options-based strategies can help clients remain invested through different market cycles while offering downside protection and potential income generation [1] - The fund's management believes that such strategies are beneficial for investors looking to mitigate risks associated with systematic factors like tariffs and geopolitical tensions [1]

Core Insights - The fourth quarter of 2025 is characterized by high uncertainty in both equities and bond markets, with options-based ETFs being presented as a potential solution for investors [1] - The primary goal of using options-based ETFs is to manage risk and portfolio volatility, as highlighted in a webinar featuring Fidelity Investments strategists [2][4] Options-Based ETF Strategies - Options-based strategies can help clients navigate various market scenarios, providing downside protection, volatility reduction, and potential income in changing interest rate environments [3] - Education on options-based ETFs is crucial, as many investors are unsure about their usage and mechanics, with 37% of webinar attendees expressing uncertainty [8][4] Active ETF Advantages - Active ETFs offer benefits such as transparency, cost-effectiveness, tax efficiency, and flexibility, contributing to their growing market share [5][6] - As of August 2025, active ETFs have seen inflows of $290 billion, with $43 billion coming from Nontraditional Equity funds, indicating a rising interest in options-based strategies [6] Yield and Market Conditions - The current market conditions, including the correlation between stocks and bonds and higher volatility, make derivative income strategies appealing, with an average 12-month yield of 7.99% [7] Fidelity's Options-Based Funds - Fidelity offers three options-based funds tailored to different market conditions: Hedged Equity ETF for downside protection, Dynamic Buffered ETF for choppy markets, and Yield Enhanced Equity ETF for enhanced income [11][16] - The Hedged Equity ETF is designed for moderate to sharp down markets, while the Dynamic Buffered ETF is suited for sideways markets, and the Yield Enhanced ETF aims to provide income with some downside protection [11] Expense Ratio and Promotions - Fidelity's Yield Enhanced Equity ETF is currently offering a limited-time 0% expense ratio, which typically stands at 28 basis points, as part of a promotional effort following the recent rate cut by the U.S. Federal Reserve [13][14]