Lloyds TSB Structured Products

Mickey Dazzler

I plan to invest 50k in the below product. I know it says sold out but I can still access it.

http://www.lloydstsb-offshore.com/offshore-savings/structured-deposits/2halfyear-sterling-growth/

Does anybody here have any experience with these sort of short term investments?

Yea or Nay??

ixus

This is 100% a mugs game.

Basically, you are buying long dated options, calls and puts that will pay out if they stay within the defined trading range.

All that has to happen once is for some event to happen over the next two and a half years and you lose any potential returns. Are you willing to bet that there will be no terrorist attack in the UK or the US in the next two and a half years?

Structured products are for retail "mug" investors.

What the bank does is take your 10K deposit, purchase and write some options with a small percentage of your 10K, we'll say 2K's worth. Then 1K is taken as a premium by the bank for all their hard work.The remaining 7K is put in an interest gaining deposit account or instrument that will be worth 10K upon maturity. (this is a very crude example)

So, no downside for the bank.
Upside for the bank is they get a nice premium.

Your upside is limited by the probability of staying within a trading range. We're in the middle of one of the greatest currency wars in a long time.

Mickey Dazzler

Than you very much for your response.

The rate has remained within the 10% barrier for the last three years. I know that past performance is not indicator of future performance but if things carried on the way they have been i would be fine. Also I had assumed that things had settled down this last year in the world economy.

I guess the reason I was attracted to it was that you cannot lose any of the capital (except through inflation of course) and that money is sitting in an offshore account now on a interest rate of 0.01% so I'm getting screwed with inflation anyway.

I figured if I'm going to loose out on inflation I might as well put the money somewhere where I can at least make up to 20% over 2.5 years with no risk to the capital.

Do you recommend another product bearing in mind they funds must stay offshore??

ixus

I can't really give any recommendations but, one way of playing this could be:

Take your 50K.

Buy the FTSE cash with 10K.
Buy a long dated put (we'll say two years) on the FTSE that covers your 10K in the event of a market crash.

Buy the S&P cash with another 10K.
Buy a long dated put on the S&P that covers your 10K in the event of a market crash.

You'll be left with 30K - the cost of the options.
You'll have your currency exposure.
You'll have upside potential - cost of your options.
Your downside is limited by how you play the options side of things.

Do you follow the theory? With that product, your upside potential is limited.
With my basic suggestion, your upside is unlimited while your downside is protected (except for currency exposure).

The currency wars are only getting started. The Swiss, Japanese, Chinese etc are all just getting going. The BRIC's are proposing setting up their own world bank due to their displeasure with the US's monopoly. Eurozone problems haven't gone away.

Anyways, just something to give you to think about.

Mickey Dazzler

Thank you again.

I'm afraid that your recommendation has gone beyond the scope of my grasp of matters financial. I have just closed my trading account because although I did not loose any money, it became very messy with tax and the likes. I am a non resident so try to keep things as uncomplicated as I can with regard to tax.

Thank you again for your insight.

Mickey Dazzler

So this structured deposit I wrote about has matured after 2.5 years.

It went very well. It stayed between the barriers and I made the full 20%. Plus I made another 4.4% on the exchange rate from £ to €.

24.4% in total after 2.5 years on the €50k made me €12.2K

I'm pretty pleased with myself (if a tad smug)...

Now.... any suggesting on where I should put this €62.2k?