At a Glance

Ability to express a particular view on market price movements

Potential to earn an enhanced return if the performance of the underlying financial instrument is in line with the expected view


What are Bull-Bear Notes?

Bull-Bear Notes are a type of equity-based structured note. They are used when an investor believes the prices of the reference stocks will be only moderately bullish or bearish over the tenor of the note.

Hence, a Bull-Bear Note can pay investors either coupon or profits if the “knock in” level (sometimes referred to as a “downside barrier”) is never touched during the note’s tenor.

However, if the Least Performing Equity or worst performing stock falls below a certain agreed level, the investor will be delivered that stock instead of receiving his principal and coupon.

Bull-Bear Notes are sophisticated investment products that carry significant risks and are not suitable for investors who do not comprehend the product or are risk averse.


How do Bull-Bear Notes Work?

The details of Bull-Bear Notes can vary. Below is a common variation.

Investors agree with their bankers or stock brokers on:

  • A basket of stocks (for example, a two-stock basket)
  • Strike levels (usually set at 100% of the reference stocks)
  • Knock-out or auto-call levels (usually set above the initial price of the stocks)
  • Knock-in level (usually set below the initial price of the stocks)
  • Coupon payable (if prices rise above the knock-out level)

Typically, Bull-Bear Notes are based on American Knock-Ins (daily observations of prices). Knock-outs are typically based on periodic observations – weekly or monthly.

Illustrative example of a Bull-Bear Note with 2 underlying shares:

Underlying Basket of Company A and Company B
Strike level 100% of initial level
Tenor 6 months
Call (Knock-out) level 100% (Monthly periodic)
Knock-in level 85%
Agreed conditional yield 12% p.a. (1% per month)

A call or knock-out event can only occur when both companies’ share prices are equal to or above their respective call prices on any Call Determination Day (the day when the note’s call levels are being observed).

Scenario Summary

Scenario Is Knock-out Triggered? Is Knock-in Triggered? Performance of Least Performing Equity Redemption
1 Yes No N.A. Principal + Pro-rated coupon
(Early redemption)
2 No No Below initial price Principal + Profit
3 No No Above or equal to initial price Principal + Profit
4 No Yes Below initial price Principal converted to LPE share at strike
5 No Yes Above to initial price Principal + Profit
6 No Yes Equal to initial price Principal

The scenarios above are for illustration purposes only, and payoffs may vary depending on how the note is structured.


Benefits of Bull-Bear Notes


Enhanced yields may be earned if investors’ view of the underlying equities is correct.


Can be tailored to suit investors’ needs, based on their choice of parameters, such as the underlying equities, exchange traded funds, or indices, knock-in and knock-out levels, and tenor.


Risks of Bull-Bear Notes


The investor risks being “put” the worst performing stock in the basket if the stocks breach their downside barrier (i.e. are knocked-in) and the worst performing stock closes below its initial price.


Bull-Bear Notes are issued by financial institutions and investors are exposed to the issuer’s credit risk.

To understand the product-related terms, visit our Glossary.

Disclaimer for Investment Products


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