I was reading about EIUL (Equity Index Universal Life) Insurance policies. They seem to be constructed to track the Dow or S&P500 with a floor at 0% gain and a ceiling at say 16% say per year. I was thinking how do they actually construct such a trade? I can see buying the index and putting on a 1 year put option at the strike price you bought the index at. That would work in most situations, but how are they making money if your ceiling is so high 15%? Most years the S&P might not go up above 15% so then the company is not keeping much of a gain and is passing you everything. Also they have to pay for the cost of the put. Anyone know how they run that business? Maybe it is done not as a Stock purchase + put, but some other way? I wonder because I am trying to construct a similar trade. I am bullish on EEM and think in the next 12 months it will increase by 10% or more. Investment horizon: 10 - 12 months Gain Sought: 10% - 15% Risk Tolerance: 5% or less Trade idea: Buy 100 EEM @ 39.90 Buy 1 SEP 2010 38 PUT @ 3.40 Total Cost of 100 Shares: 39.95 + 3.40 = 43.35 To reach 10% increase on account, need EEM to hit 47.69 (increase of 19% on current price). Max Loss is: 1.95 a share (4.88%) How could I better construct such a trade if I am very conservative with the money but bullish on an index? This money would be used as down payment for a house in about 12 months time or so.