20 July 2023: Wealth Product Ideas
*Please contact us for refreshed quotes.
The autocall bearish sharkfin is a structured product created to generate returns during market downturns.
Here’s how it works:
- Designed to benefit when the underlying index/stock declines in value.
- Allows gaining short exposure without using complex options or short selling.
- Autocalls and redeems payout if knock-out (KO) levels are hit, locking in gains.
- Asymmetric risk-reward profile profits from crashes but caps losses from gains.
- Can hedge and diversify a portfolio by profiting from downturns.
Bearish Scenario and KO (SPX falls and hits the KO Barrier): If the S&P 500 Index (SPX) falls and hits the Knock-Out (KO) Barrier of 80% of the initial level on any day during the 12-month period, the product will be knocked out. The investor will then receive the Minimum Redemption Level of 100% of their initial investment and the KO Rebate, which is set at 12.91% for the USD product and 7.57% for the SGD product. This will be paid out immediately upon hitting the KO Barrier, and the product will be terminated.
Bearish Scenario but no KO (SPX falls but does not hit the KO Barrier): If the SPX falls but does not hit the KO Barrier, the investor stands to gain. They will receive a return that is equivalent to the full extent of the fall in the SPX (since the Participation is 100%). The product will not be knocked out, and the investor will receive the final payout at the end of the 12-month tenor, which includes the Minimum Redemption Level of 100% of their initial investment, as well as the return that is equivalent to the fall in the SPX.
Sideways or Bullish Scenario (SPX remains the same or rises): If the SPX remains the same (100%) or rises, the investor will still receive the Minimum Redemption Level of 100% of their initial investment at maturity.
(Source: Bloomberg)
