Lesson 1: Income Halo Note

Income Halo Notes provide investors with the possibility of a higher stream of income than that of a standard debt security or the dividend yield from an equity portfolio. Investors who purchase an Income Halo Note receive a fixed coupon payment that is paid out over the life of the Note.

Income Halo Notes are senior, unsecured debt securities issued by a major financial institution. They are generally linked to an underlying asset — which is often a stock, Index or ETF.

Income Halo NoteWith Income Halo Notes, as long as the Underlying is not down on a price appreciation basis by more than the protection amount at the end of the Term, the investor will receive their principal back in full, along with the coupons they collected along the way. If the Underlying is down by more than the Protection Level on the final valuation date (the last day of the Term), the investor will be exposed to a loss on their principal, but still keeps the coupons they collected. The amount of the loss is determined by the type of protection an investor selects: Soft or Hard Protection.

While an Income Halo Note pays out a coupon payment like a bond, investors should bucket an Income Halo Note just as they would the Underlying. Meaning, if the Underlying on a given Income Halo Note was the S&P 500, the note should be classified as US Large Cap Core Equity. This is because the investor is taking equity risk on the downside. As a result, Income Halo Notes should not be treated as a bond in the portfolio due to the downside equity risk.

Income Halo Notes can be an effective way to achieve a customer’s desired return on the portfolio because the coupon is guaranteed, subject to the issuer’s ability to pay. Remember, all Halo Notes are ultimately an obligation of the issuing bank/entity and their ability to pay the coupon and principal, just like many fixed income instruments. This is a critical risk to understand, called issuer risk.

Ultimately, the choice on where and how to use Income Halo Notes is up to the investor, however, the Halo Team is always here to assist you with any portfolio related questions. By using Halo, investors can finally tailor their risk/reward profile to better align with their objectives instead of being exposed one-for-one on the up and the down of a given Underlying. Structured Notes are important tools that were once only available to the High Net Worth & Institutional customer that Halo now makes available to ALL in a simpler, safer and cheaper way.

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Jason Barsema is the Co-Founder and President of Halo Investing where he leads the team and product vision. With over a decade of experience managing Structured Note, he built the Halo platform to provide all investors access to this incredible investment product. Jason previously was a Partner on a large Private Banking team at Credit Suisse, where he managed portfolios for Ultra High Net Worth Individuals & Institutions. Jason has his B.A. in Economics from Northern Illinois University and his M.B.A. from the Kellogg School of Management at Northwestern University.

Biju is the Co-founder and CEO of Halo Investing where he leads the organizational strategy and team. He was one of the early co-founders of Redbox. In addition, he was a founder and the past Chairman and CEO of Trading Block Holdings, an online brokerage firm specializing in option traders. Biju received a BS in Aerospace Engineering from Illinois Institute of Technology.