Structured Products

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staffwriter2's picture
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Joined: 2007-07-27
Iocaine's picture
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Joined: 2007-06-25

You mean like Lehman Brothers "principal protection" notes?  I think the only SP I would consider would be a structured CD with FDIC insurance. 

ShotInTheDark's picture
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Joined: 2008-03-25

I avoid them.
Keep it simple. Clients don't want anything confusing right now.

staffwriter2's picture
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Joined: 2007-07-27

Yes, principal protected notes, although some of those structured notes at Lehman Brothers, and even UBS and Charles Schwab have come under fire from clients (mainly in the form of legal claims from investors) who say that the firms were using these investments to finance operational shortfalls, AND investors claimed they didn't know they were subject to the credit of the issuer  and if the issuer were to default the investment could become worthless (they thought the brokerage firm was the only issuer involved.)Structured CDs with FDIC insurance, I've heard about them but don't know about them, why would you use them/what types of client situation?

NOVA's picture
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Joined: 2005-01-11

When you want the principal protected by FDIC rather than the full faith and credit of some faltering bank.

i-add-alpha's picture
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Joined: 2009-04-16

Hello!  New to the boards but not to the biz.  I've avoided them (SP) over the years and glad I did.  I just don't have time to read a 163 page prospectus (that contains 22 pages of risk disclosure) nor do I wish to ever defend myself over it. 
 
I can remember an email around May '02 that went kinda like this: "one or more of your clients own the 9% SPARQS on EMC stock.  According to the special trust provivision on page 137 of the prospectus which states that we can redeem your ownership interest and replace it with the underlying stock should the stock price drop under $4.00 per share.
 
Not a good call to make to a client.  $25,000 investment redeemed at $4,000 and no more 9% income.
 
A year to 2 years ago they were pitching all these 9% income ideas to us again.  Unfortunately I've inherited some accounts that are full of that junk as the former advisors moved on to other places.
 
I like chocolate.  I like vanilla.  You can keep the rocky road.
 
 

Gaddock's picture
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Joined: 2007-02-23

Make it yourself. Most are no more than a cash secured put or a reverse conversion.

Gaddock's picture
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Joined: 2007-02-23

i-add-alpha wrote:Hello!  New to the boards but not to the biz.  I've avoided them (SP) over the years and glad I did.  I just don't have time to read a 163 page prospectus (that contains 22 pages of risk disclosure) nor do I wish to ever defend myself over it. 
 
I can remember an email around May '02 that went kinda like this: "one or more of your clients own the 9% SPARQS on EMC stock.  According to the special trust provivision on page 137 of the prospectus which states that we can redeem your ownership interest and replace it with the underlying stock should the stock price drop under $4.00 per share.
 
Not a good call to make to a client.  $25,000 investment redeemed at $4,000 and no more 9% income.
 
Sounds like a leap Put strategy that got assigned because they couldn't get the role they needed to keep up the payout. Client gets screwed issuer walks with fees.

i-add-alpha's picture
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Joined: 2009-04-16

After seeing what happened I realized the more the client lost the more the firm made. 

cutacheck's picture
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Joined: 2009-02-21

If you sold me one of those, the next day I would put you in front of an arbitration panel and ask you to explain to me how the formula works.   If you cant than you should be fired.    I dont think anyone can figure these prodoucts out. Anything proprietary is a scam.    Stick to stocks cash and bonds.

i-add-alpha's picture
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Joined: 2009-04-16

Cutacheck that's my point exactly!

S&P low 666's picture
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Joined: 2009-04-08

   Stick to stocks cash and bonds.

The greatest single post to this web site.   past,present,future.

cutacheck's picture
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Joined: 2009-02-21

Thank You S&P

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