Straddles in vogue as Goldman and JP Morgan dominate
Both JP Morgan and Goldman Sachs filed three new products with the US Securities and Exchange Commission on March 21, offering a selection of autocallable, straddle, reverse convertible and leveraged return notes
JP Morgan continued its run of registering varied structured products with the US Securities and Exchange Commission (SEC) on March 21, with offerings of a straddle, an autocallable and, unusually, a reverse convertible. Goldman Sachs also chimed in with three new products, all of which are leveraged return notes. In all, 10 new products were filed with the US regulator.
JP Morgan's reverse convertible has a short maturity of three months and is linked to Stone Energy. It pays an annualised rate of 10% and has a downside protection barrier of 67.87%. The bank's straddle product is linked to Apple shares and is a 1.03-year investment with an upside cap of 118.15% and a downside barrier of 80%. Lastly, the autocallable product also has a 1.03-year maturity and is linked to the S&P 500, with a downside protection barrier of 90%.
Two of Goldman Sach's leveraged return notes are linked to the performance of exchange-traded funds (ETFs). One is a 1.59-year investment based on the MSCI EAFE Index, offering potential returns of four times the growth in the index capped at 129–134%. Principal is at risk if the index finishes below its initial level. The other is also a 1.59-year product attached to the fortunes of the iShares MSCI Emerging Markets Index Fund. It offers potential returns of two times the growth in the fund subject to a maximum return of 131–136%: capital is at risk if the fund finishes below its initial level.
Morgan Stanley filed a two-year straddle linked to the iShares MSCI EAFE Index Fund, with an upside cap of 123–127% and a downside barrier of 75%.
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