Structured products take a traditional instrument, such as a bond, combine it with a derivative, such as an option, creating a payoff that is associated with the derivative. For example, combining a bond with a call option on the S&P 500 may yield a return associated with the S&P 500 versus a traditional fixed income note. There are many varieties of these securities with a wide range of names including equity linked notes, interest rate linked notes, commodity linked notes, and foreign exchange linked notes. Many of them have an additional feature whereby the principal is protected, i.e., the investor is guaranteed to receive 100% of their investment back. This of course assumes the issuer of the structured note remains solvent!! These are commonly referred to as principal protected notes.
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