Equity-linked Notes (ELN)

how to invest in equity link notes?

Is equity link notes save?

Which bank provide the best equity link notes?

(19-04-2013, 02:00 PM)revolta Wrote: how to invest in equity link notes?

Is equity link notes save?

Which bank provide the best equity link notes?

I think you need to be either accredited or a preferred/private banking customer to be offered ELN.

(19-04-2013, 02:00 PM)revolta Wrote: how to invest in equity link notes?

Is equity link notes save?

Which bank provide the best equity link notes?

Investigation Report on the Sale and Marketing of Structured Notes linked to Lehman Brothers

http://www.mas.gov.sg/~/media/resource/n...L%2009.pdf

(19-04-2013, 02:00 PM)revolta Wrote: Is equity link notes save?

most equity linked notes consist of a zero bond and options. Depending on how it is structured, the issue can be principal protected or not. (meaning you may or may not get your principal back at maturity)

It is certainly not safe since neither yield nor principal recovery is guaranteed.

(19-04-2013, 02:18 PM)AlphaQuant Wrote:

(19-04-2013, 02:00 PM)revolta Wrote: Is equity link notes save?

most equity linked notes consist of a zero bond and options. Depending on how it is structured, the issue can be principal protected or not. (meaning you may or may not get your principal back at maturity)

It is certainly not safe since neither yield nor principal recovery is guaranteed.

IMO, it is not safe as investment, but safe as hedging tool.

Eln is basically writing equity options no? IE collect premium.

(19-04-2013, 04:50 PM)godjira1 Wrote: Eln is basically writing equity options no? IE collect premium.

a long time ago, when bonds actually have a significant yield, the ELN can be structured where the purchaser pays 100%, of which X is used to purchase the zero bond (since it trades below par) and 100-X can be used to purchase an option. If the option is ITM at maturity, investor redeems the zero and collects the option payoff, hence he does not need to sell the option i.e. he has bot a right.

nowadays with bonds yielding nothing, the most common way is for the investor to write an option, pray for nothing to happen, and hopefully collect the premium. Of cos, this also means that it is non-principal protected since he has written a liability.

there are many ELN, i think it should be quite save for those ELN link to Singapore blue chip stock.
If it hit my strike price, the most i hold the stock, if it did not hit my strike price, i will earn much higher interest compare to fixed deposit.

(19-04-2013, 07:48 PM)revolta Wrote: there are many ELN, i think it should be quite save for those ELN link to Singapore blue chip stock.
If it hit my strike price, the most i hold the stock, if it did not hit my strike price, i will earn much higher interest compare to fixed deposit.

i found that the strike price is not what i want. Do banks have ELN during bear market? Who is actually the counter party? Is it the bank or third party?

The type of ELNs my company invests in is basically writing of put options on a basket of stocks.
The key components of ELNs is
1)underlying stocks
2) Strike value
3) Knock off value
4) Duration of the contracts - one month, 2 month and so on
5) most importantly, the "vol" of the market on date of committment

Usually, investors will leverage to buy ELNs so as to maximise the yield...

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(19-04-2013, 09:27 PM)Temperament Wrote:

(19-04-2013, 07:48 PM)revolta Wrote: there are many ELN, i think it should be quite save for those ELN link to Singapore blue chip stock.
If it hit my strike price, the most i hold the stock, if it did not hit my strike price, i will earn much higher interest compare to fixed deposit.

i found that the strike price is not not i want. Do banks have ELN during bear market? Who is actually the counter party? Is it the bank or third party?

YES, yield is at its highest during bear market. But you need lot of balls to do it during such market.
I was told in 2008, the yield on US banks stocks was 40% with 70% strike price. haha!

Banks are either the counter party or acting as middle man for another bank.

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(19-04-2013, 07:48 PM)revolta Wrote: there are many ELN, i think it should be quite save for those ELN link to Singapore blue chip stock.
If it hit my strike price, the most i hold the stock, if it did not hit my strike price, i will earn much higher interest compare to fixed deposit.

Try US banking stocks for higher yield.
Yield on SG stock is depressingly LOW...