RISK OF TRADING EQUITY LINKED INSTRUMENTS AND NOTES (ELIs/ELNs). (a) Equity Market Risk ELNs combine notes/deposits with options, and the return component is based on the performance of the underlying asset. You shall pay attention to fluctuations in the equity market and the underlying security price, impact of dividends and corporate actions.
(b) Counter Party Risk Most ELNs are not low risk products. You will be taking on the credit risk of the issuer and his investment return depends primarily on the future price movement of the underlying assets. You may incur loss in whole or in part, and may receive underlying security or only part of their investment capital in return.
(c) Return and Loss ELNs are structured products involving derivatives. Their maximum return is capped but the potential loss can be significant. The maximum return is usually limited to a predetermined amount of cash. However, when the price of underlying asset moves against your view, you may stand to lose part or all of your investment capital.
(d) Price adjustment You should note that the price and return of XXXx at expiry may be affected and adjusted in accordance with any dividend payment with ex-dividend pricing or any corporate actions.
(e) Liquidity Risk You should be aware that there may not always be a secondary market for the product which poses a liquidity risk. Even though it might exist, the price may be lower than that of the product’s issue or purchase price.
(f) Potential yield affected by fees and charges Generally speaking, XXXx offer an interest rate higher than that of fixed deposits and bonds, and the return on investment is also capped at the potential yield of the ELIs. You should note that you will be charged for fees and expenses for the buy/disposal of ELIs and payment / delivery at expiry. You should refer to statements for information of the fees and charges, or make direct enquiry with your broker. The information regarding potential yields may not have taken fees and charges into consideration.
(g) Additional Features and Trading policy You should pay attention to read all the offer documents of the products which are intended to invest, to understand the trad ing policy or additional features if any. Trading policy may stipulate a particular method as to how the ELI will be settled, such as in cash payment or by physical delivery. Additional features may include but not limited to early call, knock-in and daily accrual coupon. The policy and features may affect the return of the ELIs in various ways. It is importan...
