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Derivatives

FTSE100 Levels Offer Structured Product Bonanza

Low implied volatility in the FTSE100 over the last few weeks has allowed structurers to offer exceptional investment products.

Low implied volatility in the FTSE100 over the last few weeks has allowed structurers to offer exceptional investment products. Equity derivatives houses in London are pricing structures with high participation, 100% capital protection and positive returns equivalent to a downturn in the index up to a certain level. Three-month implied volatility on the FTSE100 was at 10.8% last Wednesday, compared with 12.5% on Oct. 30.

The latest product issued by U.K. distributor Nvesta, dubbed the Bull & Bear Tracker Plan, offers investors positive participation up to a 50% rise or fall in the FTSE100, with full capital protection. Keydata launched a similar product in July, but volatility levels were not so favorable. Its structure offered downside returns capped at 30% and uncapped upside returns with a 75% participation rate.

Matt Robinson, equity derivatives marketer at Morgan Stanley in London, said it is offering FTSE100 products with participation of 120%, plus capital protection over six years. This is compared to January, when it was only possible to offer 100% participation with full capital protection over the same tenor (DW, 1/18).

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