A hands-on options curriculum covering real trading concepts. Read the lessons, work through examples, and test your knowledge.
OVERALL ACADEMY PROGRESS
Free Lesson
Every lesson is free to read. Subscribe to add Signal Desk, progress tracking, PDF downloads and the lesson tutor.
Lesson 6: 13.6: Structured Notes & Capital Protection Products
Understand equity-linked notes, reverse convertibles, and principal-protected investments for wealth management.
1. Structure of Hybrid Financial Instruments
Structured Notes are hybrid financial instruments combining a fixed-income security (like a zero-coupon bond) with a derivative component (such as an option package).
For example, a 'Principal Protected Note' invests 90% of capital into a zero-coupon bond that matures back to 100% principal value, while using the remaining 10% to buy upside call options on an index.
★ Issuer Credit Risk: Investors face the credit default risk of the issuing investment bank, regardless of how well the underlying option index performs.
2. Reverse Convertibles & Yield Enhancement
Reverse convertibles pay high coupon interest in exchange for putting the investor's principal at risk. If the underlying stock drops below a buffer level, the investor receives depreciated stock shares instead of cash principal.
Click to enlargeOptions Structure Exploration
Options are contracts cleared in the bid-ask auction market. Interact with the Order Book below to understand how buy offers (bids) and sell offers (asks) intersect, and inspect the structural breakdown between Call and Put contracts.
Limit Order Book & Spread Interface
Hover over ASK or BID to dissect the auction market dynamics.
Right to Buy
- Outlook: Bullish (Goes up)
- Risk: Capped to premium paid
- Profit: Scales as stock surges
Right to Sell
- Outlook: Bearish (Goes down)
- Risk: Capped to premium paid
- Profit: Scales as stock falls
KNOWLEDGE RECONNAISSANCE
How does a typical Principal Protected Note guarantee the return of initial capital at maturity?
More lessons in this module
- 13.0: Introduction to Swaps & Derivatives Architecture
- 13.1: Interest Rate Swaps (IRS) Mechanics
- 13.2: Credit Default Swaps (CDS) & Default Protection
- 13.3: Total Return Swaps (TRS) & Synthetic Exposure
- 13.4: Foreign Exchange Swaps & Cross-Currency Swaps
- 13.5: Exotic Options: Barrier, Digital & Lookback Options
- 13.7: Counterparty Risk, ISDA Agreements & Collateral (CSA)
- 13.8: Practical Derivatives Application: Corporate Risk Playbook
Signal Desk is where you practice this on real stocks: real option chains (about 15 minutes delayed), the Trade Check and a paper-trading account that risks no real money. Join to add it, your progress tracking and PDF downloads.