Horizon Nasdaq-100 Defined Risk ETF (QGRD)

The Horizon Nasdaq-100 Defined Risk ETF (ticker QGRD) is a structured fund that owns the Nasdaq-100 while simultaneously selling out-of-the-money call options and buying out-of-the-money put options. This collar strategy creates a defined risk envelope: losses below a lower boundary are capped, and gains above an upper boundary are foregone. The fund resets these boundaries regularly, financing downside protection with the premiums collected from sold calls.

The long-stock segment: owning the Nasdaq-100

QGRD holds the full Nasdaq-100 index — the 100 largest non-financial companies on the Nasdaq exchange. This core position gives the fund direct participation in technology, semiconductors, cloud infrastructure, and biotech. As with any Nasdaq-100 fund, the portfolio is heavily concentrated in the largest dozen firms, which is the basis of the fund’s exposure to mega-cap tech and growth.

The holding is not passive. Rather, it is continuously overlaid with options positions that modify the risk profile. The fund rebalances to match the current Nasdaq-100 composition, so the underlying portfolio moves daily with the index.

The protective-put segment: buying downside insurance

To cushion large losses, QGRD buys protective put options on the Nasdaq-100. These puts give the fund the right to sell its holdings at a pre-determined floor price, called the put strike. If the Nasdaq-100 crashes below the put strike, the put gains in value and offsets the portfolio’s losses. If the Nasdaq-100 stays above the put strike, the put expires worthless and the fund has paid for insurance that was not used.

The put strike is set out-of-the-money (below the current index level), so the fund accepts some losses in a mild decline. In a severe crash, the put kicks in and limits the damage. The difference between where the index starts and where the put strike is set defines how much loss the fund can absorb before being insured. A wider gap means cheaper insurance but more loss; a narrower gap means expensive insurance but more protection.

The short-call segment: selling upside to pay for insurance

QGRD finances the cost of the protective puts by selling call options on the Nasdaq-100. These calls give buyers the right to purchase the fund’s holdings at an upper strike price, called the call strike. If the Nasdaq-100 rises above the call strike, the calls are exercised and the fund’s gains above that strike are taken away. If the Nasdaq-100 stays below the call strike, the calls expire worthless and the fund has collected premium without giving up any upside.

The call strike is set out-of-the-money (above the current index level), so the fund participates in mild to moderate rallies. In a large bull run, the calls cap the fund’s gains. The premium the fund collects from selling these calls helps offset the cost of buying the protective puts. In many cases, Horizon structures the collar so the call premium exactly pays for the put, creating a “zero-cost” collar — but such structures are rare and rely on specific market conditions.

The quarterly rebalancing and collar reset

Quarterly, the fund evaluates and potentially resets its collar. New calls are sold and new puts are bought, with strikes chosen to maintain a defined risk envelope. The fund must decide, each quarter, how wide to set the range between put and call. A narrow range offers more protection but leaves little room for upside. A wide range does the reverse. This is an active decision, not a purely mechanical formula, and it reflects Horizon’s view of future market conditions and volatility.

Each roll incurs costs and creates tax implications in taxable accounts. The fund’s expense ratio is higher than a passive Nasdaq-100 index fund because of these operational demands.

The trade-off: insurance is never free

In any year where the Nasdaq-100 rises sharply (say, 15 or 20 percent), QGRD will significantly lag because its gains are capped and some of the upside premium has been spent on put insurance. In any year where the Nasdaq-100 falls sharply, QGRD’s losses will be much smaller, cushioned by the protective put.

The fund is an insurance product, and insurance has a cost. An investor in QGRD is explicitly trading the potential for outsized bull-market gains to reduce the pain of bear-market losses. The prospectus and the fund’s factsheet show the current collar boundaries and historical performance in both rallies and declines, which is essential reading for evaluating whether the trade-off matches a given investor’s tolerance for volatility.