FT Vest U.S. Equity Deep Buffer ETF - May (DMAY)

The FT Vest U.S. Equity Deep Buffer ETF - May (DMAY) traces its lineage to First Trust’s strategic pivot in the early 2020s toward buffer-based equity funds. As market volatility spiked and retail investors fled equities after sharp drawdowns, First Trust and other managers recognized a market opening: investors who wanted stock exposure but could not tolerate swings of 20–40% in a year. Buffer funds became the solution, wrapping equity positions in protective and capped-return option strategies. DMAY arrived as part of this expansion, differentiated primarily by its May reset schedule — a choice that reflects the fund family’s commitment to offering multiple reset months so investors could tailor exposure to their own planning calendars.

Origins and the buffer movement

The modern buffer-fund category gained traction after the 2020 pandemic crash and the subsequent recovery. Investors who sold stocks in March 2020 (at the bottom) and missed the rebound learned a painful lesson about trying to time markets. Simultaneously, older investors moving to required minimum distributions needed equity exposure but feared a repeat of 2008. Buffer funds were marketed as the solution: “get equity returns with downside insurance.”

First Trust, a New York-based manager with deep expertise in structured products, launched its Equity Deep Buffer suite across multiple months and resets. DMAY was part of that rollout, designed for investors for whom May reset cycles aligned with their planning or rebalancing calendars. The fund sponsor chose “deep” buffer to signal a higher level of protection (15% floor vs. 10% in lighter buffers), meant to appeal to risk-averse cohorts.

How the May reset aligns with investor workflows

A May reset schedules the fund’s quarterly rebalancing to occur in May, August, November, and February. This quarterly cadence is mechanical: on the reset date, the fund closes out its existing option positions (puts and calls) and establishes new ones, locking in any gains or losses from the prior quarter and starting fresh. For investors who conduct annual tax planning in March or April, or who rebalance portfolios in late spring, the May reset offers natural coordination — they can assess DMAY’s quarterly return simultaneously with their other portfolio actions.

The choice of month is largely cosmetic. Whether a buffer fund resets in March, May, or December has minimal impact on performance; the decisive factor is the decision to use buffers, not the timing of the reset. Yet marketing the May option allowed First Trust to segment the market: some investors prefer resets at standard calendar intervals (January, April, July, October), others prefer May, others prefer year-end. Offering different reset dates gave different cohorts a fund that felt tailored to them.

The deep buffer structure

DMAY is specifically a “deep” buffer, meaning each quarter the fund’s losses are limited to a floor of roughly 15% below the opening price, and gains are capped at roughly 15% above. This deeper protection than some lighter buffers reflects a design choice: the fund sponsor decided to prioritize downside safety over upside participation. A 15% floor loses more than a 10% buffer in sustained rallies, but provides materially more peace of mind in crashes.

The mechanics rely on standard option collars. The fund holds large-cap equities (broadly the S&P 500 or a representative subset) and simultaneously purchases protective puts (long options giving the right to sell at the floor) and sells call options (short obligations to sell at the cap). The premium from the short calls partially or fully finances the long puts, creating a “zero-cost” or low-cost structure. Quarterly resets mean this collar expires and is rebuilt every three months.

Costs and the premium for protection

An investor in DMAY pays the fund’s published expense ratio (the management fee and administrative costs), plus the embedded cost of the option strategies. The option cost is not itemized separately; it is reflected in the fund’s returns lagging a pure S&P 500 fund in bullish periods. In calm markets, when the S&P 500 rises 5–10% per quarter, the protective puts expire valueless (they are out of the money) and the short calls bring in premium that offsets some of the fund’s costs. The net effect is modest drag.

But in high-volatility periods, when implied volatility spikes, the cost of long puts rises sharply, and the fund’s expenses tick up materially. This means DMAY is more expensive to own precisely when investors most value downside protection — a structural reality of option-based strategies. Over full market cycles, the total cost of DMAY (visible expense ratio plus implicit option costs) typically amounts to 0.5–1.5 percentage points annually of foregone return versus a non-buffered index fund.

Performance in different regimes

In quiet to moderately bullish markets (the 2010s, most months in a typical year), DMAY underperforms because of the cost of the buffer and the cap on upside. In sharp rallies (2023, for example, when the S&P 500 rose more than 15% in a quarter), the upside cap bites and the fund lags visibly. In crashes or sustained drawdowns (2022, parts of 2020), the downside floor protects; DMAX preserves capital while the plain index falls 15, 20, or 30 percent.

An investor who held DMAY through 2022 (a down year) and 2023 (a strong up year) experienced full impact of this trade-off: the fund delivered much better risk-adjusted returns in 2022 but lagged noticeably in 2023. Over the two-year period, the total return of DMAY was likely below that of a simple S&P 500 index — not because the strategy failed, but because the cost of protection exceeded the benefit in that particular cycle.

Suitability and comparative evaluation

DMAY suits investors who have decided to hold equities but cannot tolerate drawdowns greater than 15% per quarter (or roughly 30% in the worst-case annual scenario). It is not for long-term, young investors comfortable with volatility, nor for those aggressively reallocating from bonds to stocks and prepared for the path of least resistance upward. It is for near-retirees, recently retired individuals, and investors for whom a market crash would force spending cuts or force them to liquidate the position at the worst time.

To evaluate DMAY, compare its three-year and five-year total returns against a plain S&P 500 index fund, accounting for the difference in expense ratios. Look at the prospectus for the exact cap and floor levels each quarter; they change with market conditions and implied volatility. Understand that the fund is insurance — it costs something, it protects downside, and it caps upside. Whether that bargain makes sense depends on the investor’s ability to tolerate volatility and the likelihood they would make poor behavioral decisions (selling at lows, missing rallies) in the absence of the buffer.