Otpt,r 32: Structured Products 617 
Note that his downside risk is not completely eliminated, though. The current 
prke of the structured product is 16.50 and the cash value at the current S&P price 
11117.14 (see the previous example for this calculation), so he has risk from these lev­
down to a price of $14.53. 
His upside is still unlimited, because he is net long two calls - the S&P 2-year 
1,,EAPS calls, struck at 1,200. The two LEAPS calls that he sold, struck at 700, effec­
tively offsets the call imbedded in the structured product, which is also struck at 700. 
This example showed how one could effectively roll the striking price of his 
structured product up to a higher price after the underlying had advanced. The indi­
vidual investor would have to decide if the extra downside protection acquired is 
worth the profit potential sacrificed. That depends heavily, of course, on the prices of 
the listed S&P options, which in turn depend on things such as volatility and time 
remaining until expiration. 
Of course, one other alternative exists for a holder of a structured product who 
has built up a good profit, as in the previous two examples: He could sell the prod­
uct he owns and buy another one with a striking price closer to the current market 
value of the underlying index. This is not always possible, of course, but as long as 
these products continue to be brought to market every few months or so by the 
underwriters, there will be a wide variety of striking prices to choose from. A possi­
ble drawback to rolling to another structured product is that one might have to 
extend his holding's maturity date, but that is not necessarily a bad thing. 
A different scenario exists when the underlying index drops after the structured 
product is bought. In that case, one would own a synthetic call option that might be 
quite far out-of the-rrwney. A listed call spread could be used to theoretically lower 
the call's striking price, so that upside movement might more readily produce prof­
its. In such a case, one would sell a listed call option with a striking price equal to the 
striking price of the structured product and would buy a listed call option with a 
lower striking price - one more in line with current market values. In other words, 
he would buy a listed call bull spread to go along with his structured product. 
Whatever debit he pays for this call bull spread will increase his downside risk, of 
course. However, in return he ~s the ability to make profits more quickly if the 
underlying index rises above the new, lower striking price. 
Many other strategies involving listed options and the structured product could 
be constructed, of course. However, the ones presented here are the primary strate­
gies that an investor should consider. All that is required to analyze any strategy is to 
remember that this type of structured product is merely a synthetic long call. Once 
that concept is in mind, then any ensuing strategies involving listed options can easily 
be analyzed. For example, the purchase of a listed put with a striking price essential-