Myth #3: The issuer of a structured product will take the opposite bet from the investor

Myth: The issuer of a structured product will take the opposite bet from the investor.

Reality: A resounding no.
When a bank issues a product, it will look to be as fully hedged as possible from market movements that will affect the performance of the product.

In other words, it will look to generate neither a profit nor a loss if Apple goes up or down. The way the issuers make money is by charging a fee when the product is issued.

That’s the business model, plain and simple. Additionally, even if this would not be the case, there is specific regulation in place which prevents issuers to make directional bets.

What’s more, issuers and distributors are very much interested in the success of the notes sold. This means happy clients and repeat business.

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