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Capped products

This type of product has a low minimum investment but a high participation rate. It suits investors anticipating brief trends in one direction or the other.

It's possible to profit from either a rise or fall in the price of the base asset.

Example: capped product

35%
30%
26.5%
21%
15%
10%
5%
0
-5%
-10%
-15%
  • Price of gold
  • Return on investment of product in example with 95% capital protection
  • Return on investment of product in example with 100% capital protection
  • Potential return on investment of product in example with 95% capital protection
  • Potential return on investment of product in example with 100% capital protection
  • Investment period

Let's say you purchase a capped product, choosing gold as your base asset (initial price: 1,600 USD an ounce). You predict that the price of gold will rise over the following 6 months and choose "95%" as your capital protection level (guaranteeing that you will get back at least 95% of your investment at product maturity). You set the "cap level" of your product at 1,920 USD.

Based on the parameters of your investment, your product is assigned a participation rate of 1.8 (180%). Since you set the cap level at 1,920 USD, the maximum potential return from the investment in the riskier assets will be 36% (20% × 1.8 = 36%; here, the 20% is taken from the rise in the price of the base asset from 1,600 USD to 1,920 USD).

If after 6 months the price of gold has risen from 1,600 to 1,880 USD (17.5%), you will earn a 31.5% return on your investment in riskier assets (17.5% × 1.8 = 31.5%). Your product will yield an overall return of 26.5% (31.5% + 95% = 126.5%).

Let's say that the price of gold had instead risen to 2,080 USD. Since this price level exceeds the cap level of 1,920 USD, your return on investment will be tied to the cap level, not to the price of the base asset. Your return on investment in riskier assets will be 36% ( (1,920 – 1,600) / 1600 = 20%; 20% × 1.8 = 36%). Your overall return on investment in the structured product will be 31% (36% + 95% = 131%).

If the price of gold drops, you will get back 95% of your initial investment.

Invest in a capped product

FAQs

Here are some of the questions we get asked most often about structured products:

For more, please see our entire list of structured product FAQs.

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Attention:

  • The examples above are meant only to show how structured products work. The returns earned in the examples should not be construed as a guarantee of profits.
  • You may purchase structured products denominated in Russian rubles and US dollars.
  • The commission charged for investing in a structured product is 2% of the asset value. Commission is deducted at product maturity.
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