Bearish products

When anticipating a market downturn, it can be beneficial to consider bearish products. These products offer an inverse profile to traditional investments.

Used as a hedge, they are favored by investors who see them as a way to achieve inverse correlation with the market: if the market declines, the product gains value. Conversely, if the market rises, the product loses value.

🐻 Bearish or Bullish ?

When the market is rising, it is referred to as a bullish market — from the English word "bull." Conversely, when the market is declining, it is called a bearish market — from the English word "bear." A significant drop in stock market indices is considered a sign of entering a bearish market.

In the context of structured products, a bullish product — most common — offers a return when the underlying asset's level rises compared to its initial observation level. Bearish products, on the other hand, allow investors to benefit when the underlying asset decreases.

💸 With a yield product

Yield products are those that pay coupons based on the performance of the underlying asset. In a bearish product, the coupon is paid out if the underlying asset falls compared to its initial observation level. Capital protection is activated if the underlying asset rises but remains below the protection barrier.

📉 With a participation product

A bearish participation product can be an alternative to a hedging product or a real bet on the decline. It allows participation in the underlying asset's decline at maturity. For example, if the underlying asset decreases by 10% and the participation rate is 100%, the investor receives a 10% return at maturity. As with yield products, capital protection is activated if the underlying asset rises but remains below the protection barrier, within the limit of the invested capital.