100% Backed & Fully Transparent Structured Notes
100% Backed & Fully Transparent Structured Notes
Backed by Engineering & Transparency
Since launch, one of the most frequently asked questions from customers is:
Question:
What backs the structured notes that Fig Investments sells?
Answer:
🛠️ Engineering and 🔎 Transparency.
What are Structured Notes?
Quite simply, structured notes are nothing more than a basket of financial instruments:
PrincipalProtectedNote = Option[] + US-TBillFor principal protected note:
Think of it as a mini portfolio
Buying a principal protected note is equivalent to purchasing a US T-Bill and a set of options
The principal is guaranteed by the US T-Bill upon maturity
The options provide the payout on the note for when the underlying asset goes up and capped losses (to the premium) when the asset goes down
What are T-Bills?
A t-bill, or a treasury bill, is a form of government debt security. The t-bill that Fig Investments buy are issued by US Department of Treasury. They are short term investments, typically maturing from a few days up to 52 weeks. US t-bills are backed by the U.S. government.
For a principal protected note, the t-bill promises the return of principal.
What are Options?
Options are financial contracts that give the buyer the 'option' to buy or sell an asset at a defined price.
Example: a Bitcoin call option1 with $40,000 strike price that expires on March 25, 2024 will have the payoff that looks like this:
On maturity:
If Bitcoin price < $40,000, then the max loss is $1,000, which is the premium
If Bitcoin price > $40,000, then the gain is (
Price - $40,000)
Structured Notes on Fig Investments
Combining US-Tbill with options, we can engineer a structure that looks like this:
Total Note Principal: $100,000
T-bill Principal: ~$96,700 (matures to $100,000)
Bitcoin Options: ~$3,300(used to buy a call spread on Bitcoin with strike price of $40,000 and $95,000)
This combo promises you principal protection while giving you a ~20% upside participation on Bitcoin
On the backend, Fig’s structuring engine double checks all factors in building the note, such as pricing, liquidity, fulfillment, spread, volatility, and accounting for individual instruments. All within 3 seconds! 🚀
100% Backed By Transparency
Since structured notes are nothing more than its composing instruments, they are inherently backed by the underlying assets they are composed of - the Treasury bills (T-bills) and the options.
At Fig Investments, we transparently show our customers the composing instruments as well as proof of reserve - a transaction record on the fact that we 100% hedge every single obligation of the structured notes on our books. No exceptions.
Transparent term sheets: What you see on the screen is what we guarantee for fulfillment, or you get your money back. You can see the fees, spread, cost, and time of fulfillment
Backed by 1-1 hedging. For each note, customers can see the note composition as well as the transaction record of our hedge. Transaction records are transparently attached to every note sold through Fig Investments
Segregation of customer assets from company capital. The principal of a principal protected note, which is guaranteed by the US-Tbill upon maturity, is held at a qualified custodian and is strictly segregated from our company’s working capital
Fig Investments - 100% Backed Structured Notes
At Fig Investments, we take great pride in our ethos on:
🔬 Transparency
⚙️ Efficiency
🌎 Inclusivity
To make structured products accessible for everyone.
For questions, please do not hesitate to reach out to us at gm@fig.investments.
Disclaimer: The information provided in this blog post is for educational and informational purposes only and is not intended as financial advice. The content is not meant to provide, and should not be relied upon for investment, accounting, legal, or tax advice. You should consult your own financial, legal, tax, or other professional advisors before engaging in any transaction. The views expressed on this blog are the author's own and do not necessarily reflect the views of any financial institutions or other entities. Investing in financial markets involves risks, and there is always the potential of losing money when you invest in securities. Past performance is not indicative of future results.
For simplicity, the option used in the example is a vanilla European style option.