The Derivative

Who hasn’t been pitched a buffered note at this point? Participate in the upside and get credited back the first 10% in losses. What could go wrong?  There are billions of dollars of these things out there, and they’re even creeping into the ETF and mutual fund space. How exactly do they work? Which options are being bought and sold? Is there hidden risk? What about exotics and knock ins and all the rest…. Do they cause extra liquidity issues for the market as a whole?

We sat down with Exceed Investments Joe Halpern in the lively chat to find out just how these buffered notes work, and what investors need to be careful of. Listen to Joe talk about finding the right call to sell to cover the spend, why tail risk is much more important than a 10% buffer, field hospitals in Central Park, what it was like unwinding Lehman Brothers structured products, crafting exotic derivatives at ING, Stevie Cohen as the Mets owner, why duration matters, and how the risk/reward profile of a buffered note changes as the market moves. Enjoy!

Chapters:

00:00-02:25=Intro

02:26-09:32=Mets, Cohen, Bobby Bonilla Day & Madoff

09:33-27:47=Custom Structured Notes & In the Trenches at Lehman

27:48-49:28=Behind the Scenes on a Buffered Note

49:29-01:08:00=Exceed = A Floor instead of a Buffer

01:08:01-01:16:27=Favorites

From the episode:

Webinar: Buffered Strategies: What They Are, How They Work, & When to Use Them - 1 CE Credit

Catalyst Buffered Shield Fund

Follow along with Joe on twitter @halpjoe, and visit Exceedinvestments.com for more information.

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