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CAIE notes 1 - Coggle Diagram
CAIE notes 1
Structure
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Total return SWAP strategy [look Holdings on the products website]) not going to ask a lot why is it taxed that way. CAIE doesn’t own any of the notes, total return swapped geeting the synthetic exposure of those notes
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JPmorgan is the SWAP counterparty, they are the hedge provider, they give the synthetic return of the portfolio of the laddered autocallable notes, from Mercube IS large Cap Vol Advantage Autocall Index, which is S&P with more volatility, in return Calamos gives back the SofR rate +10 basis points
Sofr rate: secured overnight, cost of borrowing cash overnight
SWAP: agreement between 2 finance parties, Calamos is on the management side, and JP is the hedge providerm JP can’t do the strategy themselves because they can’t act as the swap counterpart and act in the 2 parties in the total return swap, Calamos giving them this they will get meaningful trading gains.
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As collateral for the portfolio they use Boxspreads (don’t have to know that much about boxspread) and also gives the tax advantages income by lowering the tax basis)
[Morningstar article, Tax advantage of CAIE]
Underlying assets of CAIE: make it simple CAIE holds a laddered exposure of 52 autocallabels notes and week to week we had one note to the ETF portfolio itself to have consistent income and staggered maturity dates (each notes in the portfolio has a maturity of 5 years) in the first 18 months of the note is out it can’t be called away
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Each atuocallble note within CAIe has a coupon barrier of negative 40 %, as long at the reference index the Mercube does not fall more than 40 % than the coupons are paid.
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Autocallable
market linked instrument where coupon payments and principle at maturity are tied to equity market performance not falling below a set threshold, as long as the coupon barrier doesn’t fall below negative 40% then coupons are still paid
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Structured notes are the same as auto callable notes but auto callable are linked to equities, they’ll be automatically called away and on structured have to manually call them away.
Taxation
tax advantage because 75% of the income is income on capital, the longer you hold it the lower the ETF gets, if hold more than the year then it’s taxed at long term capital gains, if hold less than a year and sell it then short term capital gain, but more of the income is distribituion
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Risk
Since reference index is linked to Mercube then exposure to S& P , volatility handle of 35%
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