Fortis Bank is marketing a five-year guaranteed note on the Dow Jones EURO STOXX 50 index that is structured using over-the-counter call options. Koen Zoutenbier, senior account manager on the derivatives and structured products desk in Amsterdam, said the products give high-net-worth investors a 100% capital guarantee plus 150% participation in the first 25% growth in the index, 70% participation in the next 25% growth and then 50% participation for anything over that.
The note will have a maximum notional value of EUR50 million (USD43.8 million). The strikes on the options will be set today, Zoutenbier explained. In the deal Fortis Bank sells investors at-the-money calls worth 1.4 times the notional value of the note. The bank also writes 0.7 times the value in calls with strikes at 125% of the initial level and 0.35 times the notional value of the note in calls with 150% strikes. All the calls are for the five-year maturity of the note.
The note is aimed at high-net-worth individuals who want to gain exposure to the stock market but are predicting a gradual increase and may even fear further losses, according to Zoutenbier. He added, "People don't think they will double their money anymore. That was a different sector and a different time." Fortis chose the EURO STOXX 50 because Banque Générale Du Luxembourg's clients were asking for that index as it is made up of large stable companies.
