StructuraWisor by Finwisor · AMFI-Registered Distributor (ARN-166452) · Educational platform, not a solicitation to invest
Enhanced coupons look like free yield. They are not. Understand exactly what you sell to earn them.
A yield-enhancement note pays an above-market coupon. In return, you usually give up the market's upside and accept the risk of a capital loss if a barrier is breached.
In effect you are being paid a premium for taking on a defined market risk. The coupon is that premium.
As long as the underlying holds above the barrier, you collect the coupon and feel comfortable. If it breaks the barrier, the comfortable coupon can be replaced by a real loss.
The higher the coupon, the more risk you are usually being paid to take. Treat an unusually generous coupon as a warning to read harder.
The coupon is a premium for risk, not a free lunch.
Compare the coupon to the depth of the barrier and the quality of the issuer. Stress it against historical drawdowns before deciding the yield is worth it.
This article is educational and does not constitute investment, tax or legal advice, nor a solicitation to invest. Any figures are indicative illustrations of mechanics, not forecasts. Refer to official term sheets and consult a qualified professional before investing.