Structured notes, explained.
A structured note is a contract with a bank that defines exactly what you earn in every market scenario. Each structure trades some upside for protection or income. Here is every type we offer, drawn out.
Illustrative only. Six structures, six ways to shape the same market.
Auto-Callable Income Note with Memory
You earn a fixed coupon at each observation date as long as the underlying stocks stay above a coupon barrier. The memory feature means any missed coupon is banked, not lost: it pays out later, the moment the stocks recover.
- Regular coupons while underliers hold above the barrier
- Missed coupons are remembered and paid on recovery
- Auto-calls, redeeming early at par, if underliers are above their initial level on a call date
Illustrative only. Coupon rates, barriers, and observation dates vary by issuance.
Market-Linked Growth Note
Instead of coupons, you participate in the upside of the underliers at maturity, often at more than 1x, in exchange for a downside barrier. Above the barrier your principal is returned in full; below it, losses track the worst performer.
- Upside participation at maturity, frequently uncapped
- Principal returned in full as long as the worst underlier stays above the barrier
- Below the barrier, losses are one-for-one from the initial level
Illustrative only. Participation rates and barrier levels vary by issuance.
Principal Protected Note
The most conservative structure we offer. Your principal is protected at maturity by the issuing bank, whatever the market does. In exchange, upside participation is more modest, though often still uncapped.
- 100% of principal returned at maturity, subject to issuer credit
- Participation in upside, often above 1x, sometimes uncapped
- Often paired with a fixed Year-1 call premium
Illustrative only. Protection is an obligation of the issuing bank, not a guarantee of the strategy. Terms vary by issuance.
Step-Down Snowball Growth Note
The premium grows the longer you wait, and the bar for getting paid drops every year. If the note is not called in Year-1, the potential premium snowballs while the call barrier steps down, making a payout progressively easier to reach.
- Call premium accumulates each year the note runs
- Call barrier steps down annually, raising the odds of being called
- Barrier protection at maturity, to a defined level
Illustrative only. Premium schedules and barrier steps vary by issuance.
Catapult Growth Note
Two ways to win. If the underliers are above their initial level on the first call date, the note is catapulted: it redeems early with a large fixed premium. If it is not called, you stay invested for enhanced, often uncapped, upside at maturity.
- Large fixed premium if called at Year-1
- If not called, leveraged upside such as 1.5x or 2x uncapped at maturity
- Downside barrier protects principal to a defined level
Illustrative only. Premiums and participation vary by issuance.
Dual-Directional Note
The market falls, and you still gain. Within the protected range, a decline in the worst underlier is converted into a positive absolute return: down 30% becomes up 30%. Only a breach of the barrier exposes you to losses.
- Positive return whether the market rises or falls moderately
- Within the protected range, declines pay their absolute value as a gain
- Beyond the barrier, losses track the underlier one-for-one
Illustrative mechanics with a hypothetical barrier and 1x participation. Not the terms of any note, and not a projection.
Illustrative only. Ranges and barrier levels vary by issuance.
Which structure does what.
Every note trades something for something. This is the shape of each trade, at a glance.
| Structure | Primary objective | Downside protection | Early call | What you trade away |
|---|---|---|---|---|
| Income w/ Memory | Regular income | Barrier | Auto-call | Upside beyond the coupon |
| Growth | Capital growth | Barrier | Sometimes | Dividends, and full loss below the barrier |
| Principal Protected | Capital preservation | Full, at maturity | Sometimes | The most upside participation |
| Snowball | Accumulating premium | Barrier | Steps down yearly | Liquidity while the premium builds |
| Catapult | Growth, with an early exit | Barrier | Year-1 premium | Certainty about your holding period |
| Dual-Directional | Return in either direction | Barrier | Sometimes | Upside cap in some issuances |
Protection described is provided by the issuing bank and is subject to its credit. Features vary by issuance; the terms of any specific note govern.
Key considerations.
We only place notes from global banks and size them as one sleeve of a diversified plan, never the whole plan.
Issuer credit risk
Structured notes are unsecured obligations of the issuing bank. If the issuer fails, protection and principal fail with it.
Limited liquidity
Notes are designed to be held to maturity. Selling early, where possible at all, may mean accepting less than the note is worth.
No dividends
You forfeit dividends on the underlying stocks for the life of the note.
Barriers can break
In a severe drawdown a barrier can be breached, and losses from that point track the worst performer one-for-one.
Capped or contingent upside
Most structures trade away some upside, and coupons are contingent on conditions being met.
Talk it through with our team.
Browse current terms, trade dates, and barriers on the marketplace, or start with a conversation.