[roll3432]

anybody can explain what it below means?

939 HK + 2628 HK Callable Accrual

Underlying: 939 HK (China Construction Bank)
2628 HK (China Life Insurance Co.)
Call: 95%
Strike: 85%
Coupon: 20.00% p.a. (first coupon fixed)
Tenor: 2 Years
Frequency: Bi-monthly Call
Currency: USD

someone told me that this is structured product.
this one looks like product with options.
But I dunno how I read.

A basket of two stocks. Purchase call option priced with strike ( 85% of spot price??? ) . Coupon seems interests. Call is....

Please explain to me..

Thanx

[freeier]

everyday the price of 939 and 2628 are observed.
if either one of them fall below 85% of the price on the start date, you do not get any coupon accrual for that day. else u get a 20% coupon accrual.

every 2 months there is a call observation. if the price of both 939 and 2628 are above 95% of original, the deposit is terminated and u get your money back plus the interest accrued.

if at the end of 2 years the worst performer is below 85% of the initial price, u get the stock at the 85% price (i.e. not a capital protected product)

[back2HK]

Originally Posted by roll3432

A basket of two stocks.

No, It is the "worse of" the 2 stocks

Purchase call option priced with strike ( 85% of spot price??? ) .

Actually selling put options with 85% strike

Thanx

There is no free lunch. Interesting coupon implies "interesting risk"

[tsuiwah]

Originally Posted by freeier

everyday the price of 939 and 2628 are observed.
if either one of them fall below 85% of the price on the start date, you do not get any coupon accrual for that day. else u get a 20% coupon accrual.

every 2 months there is a call observation. if the price of both 939 and 2628 are above 95% of original, the deposit is terminated and u get your money back plus the interest accrued.

if at the end of 2 years the worst performer is below 85% of the initial price, u get the stock at the 85% price (i.e. not a capital protected product)

so, in order to collect the "interesting" coupon, you have to hope that the prices of the underlying stocks fall more than 5% (and ideally not much more than that) but less than 15%?

why would anyone want to buy this?

[freeier]

you want it to go up above 95%.
since if you do that u'd get your 20%*2/12 = 3+ percent within just 2 months.

for someone that thinks the two chinese shares are not going to go below 85% of the current price they can get a high yield return with the product.

frankly, for such a worst of basket with a 2 years put, the risk is very high. the private bankers do these kind of structures as well but they tend to keep to within 6mths or max 1 years. i used ot issue alot for just 6 weeks.

alot of traders take these kind of risk. i.e. selling options. the monetization of the risk premium is quite attractive if you do it over a long time. but retail tend to be one time investment/punting and in such cases i'd recommend ppl to do straight fund/equity invest more than this.

[roll3432]

wow, thanx guys. he kept pushing me to invest on this products. He also mentioned airbag thing..but I didn't understand it.

[freeier]

i suppose the airbag refers to the 85% strike level. so in case any of the 2 stocks really drop you get to buy the worst one at 85% current price.

[jmu]

roll3432, Just out of curiosity, which bank was this?

[freeier]

most banks sell such stuffs these days.