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[kimikaze88]

Not as an issuer, I was referring to as a investor, what is the diff between this and a CC?
with both there is limited upside participation and limited downside protection!
with own CC there is little counter party risk where as with these structured products the issuer is your counter party is it not?
( Both have the risk of the underlying going down big way)
so apples to apples and specially on exchanges where there are good Exchange Traded Options available , and no need to go to any OTC options!

It is totally different.

As an investor point of view, CC cannot pay you much and wouldn't give you any downside protection.

For example on Phoenix Autocallable Notes, it can quote you 2% monthly coupon equivalent to 24% PA, you won't get this price no matter how you trade with exchanges option and remember, there are no downside protection for your CC. Usually Knock In barrier at 30% downside and Knock Out at 10% upside on observation. This means as long as the underlying price remains above 70% and below 110%, you are receiving 2% every month. Even if the underlying at 71% on maturity and never go below 70%, you are getting full nominal amount with 24% return. You have to remember that your CC sell call still need to loss 29% on underlying even if you can sell 2% premium every month which is very less likely.

Yes, you cannot avoid counter party risk on OTC especially tailor-made notes.

 

[sle]

you won't get this price no matter how you trade with exchanges option

That, obviously, is not true. Structured notes are not magical, they are simply transforming the cost of risk already represented in the listed/vanilla markets.

Sorry, I don't really get your question. Do you mean I buy a notes? If that's the question, I don't buy notes and I don't have any autocallable positions. What I mean is my hedging techniques are similar to hedging a notes but in higher frequencies, which means I am the side of issuer instead of a buyer.

I am simply trying to understand where your alpha comes from. Are you trading volatility relative value based on the consensus autocallable positions? Are you doing something else?

 

[kimikaze88]

That, obviously, is not true. Structured notes are not magical, they are simply transforming cost of risk already represented in the listed/vanilla markets.

In issuer point of view, no no. If it can be done with vanilla markets, why don't issuer just hedge with vanilla market? No matter how you replicate using vanilla, it won't works. I can assured you this.

 

[sle]

In issuer point of view, no no. If it can be done with vanilla markets, why don't issuer just hedge with vanilla market? No matter how you replicate using vanilla, it won't works. I can assured you this.

Nobody is saying that it can be replicated using a static vanilla position. However, it can be represented via mostly vanilla risk factors (you buy that much Vega from the client, that much gamma, that much volga etc) and managed as such. All of these things (maybe with exception of purely exotic risks like correlation or forward skew) are already represented in the vanilla universe. An exotics trader is simply collapsing that position via his hedging process (you buy a bunch of risk factors buy issuing a note and then sell these risk factors via vanillas).

 

[kimikaze88]

Nobody is saying that it can be replicated using a static vanilla position. However, it can be represented via mostly vanilla risk factors (you buy that much Vega from the client, that much gamma, that much volga etc) and managed as such. All of these things (maybe with exception of purely exotic risks like correlation or forward skew) are already represented in the vanilla universe. An exotics trader is simply collapsing that position via his hedging process (you buy a bunch of risk factors buy issuing a note and then sell these risk factors via vanillas).

I'm sorry, my mistake. But I heard that people can static hedge by using Barrier and Digital, but actually I have no idea how that works. You have any idea? I forgot where I skimmed on some paper but didn't do much research about it.

 

[silveredge]

i used to market-make equity structured notes to PB clients, but as sle said what does it mean to trade structured notes as a strategy? it is something you don't have access to and in and of itself is just a product.

 

[kimikaze88]

i used to market-make equity structured notes to PB clients, but as sle said what does it mean to trade structured notes as a strategy? it is something you don't have access to and in and of itself is just a product.

When someone doesn't want to reply you much, this means that your post aren't gaining any interest to him anymore. I don't like wasting time with those who know fortune telling and acting they are the smartest. I have seen so many of them and please stop wasting your time here. I can answer your last question. I never mentioned from investor point of view but from issuer. If you couldn't see the opportunity from issuer it doesn't mean others can't. Again, if an issuer unable to see the profit opportunity, why the hell they want to issue notes and giving high return? For someone who doesn't understand how to hedge from issuer, they wouldn't see the opportunity there. As simple as that.

Thank you for your great advice again and have a good day.

 

[silveredge]

if you live in KL, maybe I can give you a gig to save up some cash, which is to greet my airbnb guests in mont kiara, so can use the pocket money towards buying accumulators sold by stanchart. If i like it, might consider hiring you to hk as a trainee trader

 

[kimikaze88]

if you live in KL, maybe I can give you a gig to save up some cash, which is to greet my airbnb guests in mont kiara, so can use the pocket money towards buying accumulators sold by stanchart. If i like it, might consider hiring you to hk as a trainee trader

The more you post, the more you expose yourself as a BS person. I already thank you and appreciate your fortune telling advise. That's enough, isn't it? Don't waste your valuable time and mine as well.

 

[kimikaze88]

I am simply trying to understand where your alpha comes from. Are you trading volatility relative value based on the consensus autocallable positions? Are you doing something else?

Sorry, didn't notice you edited. Yes, I remember I mentioned earlier post that volatility are extremely important for this approach. For your info, not all market works. I tested on Hang Seng, DJIA, and Nikkei before. It just couldn't work out. I still trying to figure where has gone wrong.