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Structured notes…. there has to be a CATCH… where are the fees?

Home General Investing Structured notes…. there has to be a CATCH… where are the fees?

  • Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 6177
    Joined: 01/12/2016
    Splash Refinancing Bonus

    Might have been interesting back in my energetic youth, but I have all I can handle now, which is great.

    Was thinking about this a bit, and the best way to do it would likely be using spreads to reduce your overall costs. Choose a strike more in reality and one a bit further away or absolutely not reality, depends on how much you want back from it. Bonds being in the upper range they have been for a while, no time like the present.

    Do you have a link the note prospectus or description?

    #207989 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 6177
    Joined: 01/12/2016

    Another important factor to consider is that you do not own the underlying investment.  You have only a promise to pay by the investment bank (who owns the usual combination of a zero coupon bond and call option that makes up the structured note).  Ask people that owned structured notes issued by Lehman Brothers how much they recovered (zero for one of my clients to date-and No, I did not purchase that “investment” for them).

    Click to expand…

    Great point, never forget your counterparty risk. Happened last year with XIV. Risk with any ETN as well, those are notes, some are fine, but do know what you’re holding.

    #207993 Reply

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