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When you buy a bull ELI, you will make a pre-determined gain if the closing price of the reference asset on the final valuation date (final price) is at or above a predetermined price (strike price).

You are selling a put option on the reference asset to the issuer. As a seller of a put option, you will be obliged to buy the reference asset from the issuer at the strike price if the final price of the reference asset is below the strike price.

Example (Please note that expenses are not taken into account):

Note: For some ELIs, the purchase price is equal to the nominal amount of the ELI. If the final price of the reference asset is at or above the strike price, you will receive the sum of nominal amount and coupon amount in cash, or otherwise, physical delivery of the reference asset, which is equal to, depending on the terms of the ELI:

(Nominal amount + Coupon amount) / Strike price
Or
(Nominal amount / Strike price) + Coupon amount in cash

Bull ELI linked to a basket of stocks

The reference asset(s) of an ELI may be a basket of stocks. You are selling a put option over the stocks in the basket. You will be obliged to buy the worst-performing stock in the basket at its strike price if the final price of the worst-performing stock is below its strike price.

Example (Please note that expenses are not taken into account):

Example: Bull basket ELI linked to Stock B and Stock C
Nominal amount $12,000
Purchase price $11,640
Investment period 6 months
Initial spot price of Stock B and Stock C $50
Strike price 80% of initial spot price (i.e. $40) for both stocks
Reference asset Worst-performing stock (i.e. the stock that has the lowest performance* among the basket of stocks)
Mode of settlement in case the final price is below the strike price Physical delivery

Final valuation date: Is the final price of the worst-performing stock AT or ABOVE its strike price?

Scenario 1: Final price of Stock B is $30, and the final price of Stock C is $45
Performance of a stock is determined as:
(Closing price on final valuation day / Initial spot price) x 100%
Performance of Stock B: $30 / $50 = 60%
Performance of Stock C: $45 / $50 = 90%

Stock B is the worst-performing stock. You will receive Stock B:
(Nominal amount / Strike price of Stock B) = $12,000 / $40 = 300 shares

Based on the final price, the market value of your shares will be worth less than your original investment, representing a paper loss of: $11,640 - ($30 x 300 shares) = $2,640

Scenario 2: Final price of the worst-performing stock is AT or ABOVE its strike price
You will receive the nominal mount of $12,000 in cash, a gain of:
$12,000 - $11,640 = $360