Structured Notes

[juelim]

Anyone familiar with Structured Notes? Any pros and cons to share?

 

[windwaver]

Anyone familiar with Structured Notes? Any pros and cons to share?

Which structured note in particular?

 

[Wood41]

Can Huat ?

 

[wahkao3]

is it low risk high return??

 

[juelim]

Which structured note in particular?

Product packaged by banks with basket of stocks with knock-in knock-out mechanisms, where you either get return of principal + coupon at the end of a period or the worse performing stock.

Just wondering if anyone has invested in such products and has experience to share?

 

[achtung7]

There are several variations.... some are really bad and some are bad.. it all depends on what the underyings are and the levels...

 

[juelim]

Came across this article. Seems to be quite bad for investors? Especially given the KI will occur when any ONE of the underlying stock goes below the KI price at the end of the investment period.

http://www.straitstimes.com/business/invest/retail-investors-steer-clear-of-complex-structured-notes

 

[Shiny Things]

Product packaged by banks with basket of stocks with knock-in knock-out mechanisms, where you either get return of principal + coupon at the end of a period or the worse performing stock.

Just wondering if anyone has invested in such products and has experience to share?

Yeah, those autocallables are really awful products, especially at the retail level. Basically there are two outcomes:

1) Stocks go up: the structured note early-redeems, and you lose your phat coupon, which is bad; or,
2) Stocks go down: the structured note knocks-in, and you take a huge capital loss (like in the article), which is very bad.

Notice how neither of those outcomes is good. These autocallables are always and everywhere a bad investment at the retail level.

(For the nerds: you're effectively taking out a huge bet, with your own money, on the correlation between the stocks in the basket. Ask yourself this: what are the odds that you know more about market correlations than the propellerhead quants who structured this note?)

 

[sgdividends]

Product packaged by banks with basket of stocks with knock-in knock-out mechanisms, where you either get return of principal + coupon at the end of a period or the worse performing stock.

Just wondering if anyone has invested in such products and has experience to share?

The risk reward ratio is off.

Your profit is capped. Usually at 8% pa of your principal?

Your downside is theoretically your whole principal , though one RM said based on her history of selling such stuff, historically maximum 60% loss for a particular customer

 

[unhinged_loon]

Yeah, those autocallables are really awful products, especially at the retail level. Basically there are two outcomes:

1) Stocks go up: the structured note early-redeems, and you lose your phat coupon, which is bad; or,
2) Stocks go down: the structured note knocks-in, and you take a huge capital loss (like in the article), which is very bad.

Notice how neither of those outcomes is good. These autocallables are always and everywhere a bad investment at the retail level.

(For the nerds: you're effectively taking out a huge bet, with your own money, on the correlation between the stocks in the basket. Ask yourself this: what are the odds that you know more about market correlations than the propellerhead quants who structured this note?)

Wait, those quants can't really predict the market in the first place.

 

[unhinged_loon]

The risk reward ratio is off.

Your profit is capped. Usually at 8% pa of your principal?

Your downside is theoretically your whole principal , though one RM said based on her history of selling such stuff, historically maximum 60% loss for a particular customer

No thanks. I'll take index ETFs. TYVM.

 

[hygge island]

So i get it that Structured notes offered by banks are biased, hence not good product for retail investors.

But i was wondering is it possible to reverse engineer those notes from the banks with their quants crunching the numbers, such that I sell put options to mirror those KI, KO, strike prices?
My banker sends me those ELN and FCN often enough, not knowing that I am buying/selling options on my own. So I thought I might draw some inspiration with those KI, KO prices? ANy thoughts?

 

[yiron]

So i get it that Structured notes offered by banks are biased, hence not good product for retail investors.

But i was wondering is it possible to reverse engineer those notes from the banks with their quants crunching the numbers, such that I sell put options to mirror those KI, KO, strike prices?
My banker sends me those ELN and FCN often enough, not knowing that I am buying/selling options on my own. So I thought I might draw some inspiration with those KI, KO prices? ANy thoughts?

It’s not biased, just poorly priced for the risk that you are taking on.

You could synthesize the same payoff cia derivatives but not sure why you want to do that unless you are expressing a certain market view. The banks typically structure such notes to offload certain risks on their books that are either difficult or expensive to hedge, hence don’t think there is much inspiration to be drawn.