Structured Products
Notes combining a bond with a derivative for a customized payoff.
What is Structured Products?
Typically a bank note whose return is linked to an index, with features like partial principal protection, caps on upside, or leveraged participation. Any protection depends on the issuer's credit. They are complex, often illiquid before maturity, and their costs are embedded rather than visible.
Structured Products: a worked example
A 5-year note returning 100% of the S&P 500's gain, capped at 40%, with principal returned at maturity - if the bank is solvent.
More terms in Equities, Funds & Alternatives
Shareholder Rights (Statutory vs. Cumulative Voting)
Voting, preemptive rights, dividends when declared, inspection, limited liability.
Types of Preferred Stock
Cumulative, convertible, callable, participating, and floating-rate preferred.
American Depositary Receipt (ADR)
A dollar-denominated receipt for foreign shares, traded in the US.
Rights vs. Warrants
Rights: short-term, below market. Warrants: long-term, above market.
Restricted & Control Stock (Rule 144)
Unregistered or insider-held stock with resale limits.
Employee Stock Options (ISO vs. NSO)
Incentive options get capital gains treatment; nonqualified options create income at exercise.
Technical Analysis
Forecasting prices from charts, trends, and trading volume.
Fundamental Analysis
Valuing a company from its financial statements, management, and industry.