(TAIL) Cambria Tail Risk - Ratings and Ratios

The Cambria Tail Risk ETF (BATS:TAIL) is an actively managed fund designed to mitigate potential significant losses in domestic equities by employing a strategic investment approach. It achieves this by allocating its assets to cash and U.S. government bonds, while also utilizing a put option strategy to hedge against substantial declines in the value of U.S. stocks.

The funds adviser allocates approximately 1% of the funds total assets each month to purchase put options, effectively creating a form of insurance against market downturns. This strategy is particularly relevant in times of heightened market volatility or when indicators suggest an increased likelihood of a significant market correction.

Given the current technical indicators, such as the Last Price of $12.10 being below both the SMA20 ($12.71) and slightly above the SMA50 ($12.34), it suggests a short-term bearish trend but with a potential for stabilization or slight recovery in the medium term. The SMA200 at $11.70 indicates a longer-term uptrend. The ATR of 0.41, or 3.36%, signifies moderate volatility. Considering these factors, a potential short-term strategy could involve closely monitoring the funds price action around its moving averages for potential entry or exit signals.

From a fundamental perspective, the funds Assets Under Management (AUM) stand at $162.97M USD, indicating a moderate level of investor interest. While not exceptionally large, the funds AUM is sufficient to provide liquidity. The ongoing monthly allocation of 1% of its assets towards put options underscores its commitment to its risk management strategy, potentially appealing to investors seeking to hedge their portfolios against market downturns.

Forecasting the funds performance involves analyzing both technical and fundamental data. If the current trends continue, with the S&P 500 or other domestic equity indices showing signs of strain or reversal, TAIL could potentially benefit from its hedging strategy, possibly driving its price upwards. Conversely, in a strongly bullish market, the funds performance might be subdued due to the cost of maintaining its put option strategy. Given the current SMA20 and SMA50 levels, a breakout above $12.71 could signal a potential short-term uptrend, with a target possibly near the 52W High of $13.91. However, failure to break through this resistance could result in a reversion to the mean around $12.34. Investors should closely monitor market conditions and adjust their strategies accordingly.