Structured notes fall under hybrid category of securities as they combine the feature of bonds and derivatives into one instrument. The return of the structured note is linked to the return of an underlying asset or a basket of assets which can be equities, indexes or commodities. These notes provide a periodic coupon payment while also giving an opportunity to go long the underlying stocks at prices below current market price at expiry.
Investors who want to capitalize on equity market opportunities while earning a consistent yield.
Investors also have a price point in mind (lower than the current price) at which they are willing to take delivery of any one of the underlying.
One can look to do Structured notes on their favourite stocks during relatively high vol market conditions or if the stocks have rallied a lot and we want to earn a fixed yield while waiting for better entry prices.
These may or may not be principal protected and the investor is also exposed to credit risk of the issuer.
Most of these structures limit the gains to the coupon payments.
Investor is exposed to liquidity risk of the product and these can be difficult to unwind before maturity.