A Smarter Way to Use Structured Notes: When “Worst-Of” Meets “Best-Of” Protection

Structured products often get a bad reputation.

Not because they are inherently flawed, but because they are often misunderstood.

Most investors hear terms like auto-callable, barriers, or worst-of, and immediately tune out. And to be fair, many structures are overly complex or poorly explained.

But every now and then, a structure comes along that is worth unpacking properly, not because it is “perfect,” but because it introduces a more thoughtful balance between risk, return, and real-world behavior.

This is one of those cases.

The Opportunity in Plain English

36M USD Autocall Phoenix Memory on AMD, CVX, GS.pdf

Download PDF • 2.58MB

The note I’m discussing here (attached above) is a 3-year USD auto-callable Phoenix Memory note linked to three companies:

• Goldman Sachs (Financials)

• Chevron (Energy)

• AMD (Technology)

  
  

At a high level, it offers:

• 10% per annum income (paid quarterly)

• Conditional protection if markets fall

• The ability to redeem early if markets cooperate

But the real value is not just in the headline yield, it’s in how the structure behaves under different scenarios.

First — Let’s Address the “Worst-Of” Reality

This is a worst-of structure.

That means:

• The weakest performing stock determines outcomes

• There is no averaging across the three names (like in an equal weight structure)

If one company struggles, it can drag the entire structure with it.

That’s the trade-off for earning enhanced income.

And it’s important to be very clear about that, because this is where many investors misunderstand structured notes.

So Why Use a Worst-Of Structure at All?

Because markets don’t move in straight lines.

A structure like this is designed for environments where:

• Markets are range-bound or moderately positive

• Volatility exists, but not catastrophic drawdowns

• Investors want to be paid while waiting

Instead of needing all three stocks to rally meaningfully, you simply need:

• The worst performer to stay above 60% of its starting level to earn income

That’s a very different requirement than “stocks must go up significantly.”

The Feature That Changes Everything: The “One-Star” Mechanism

This is where this particular structure becomes interesting.

At maturity, most worst-of structures behave like this:

• If the worst stock is down significantly → you take a loss

But this one introduces a “One-Star” feature at 105%.

In simple terms:

If any one of the three stocks is up at least 5% at maturity, you receive 100% of your capital back- even if another stock performed poorly.

This is unusual.

It effectively introduces a “best-of” element into a worst-of structure.

Why This Matters in the Real World

In most market environments:

• Not everything moves together

• Some sectors outperform while others lag

For example:

• AI-driven tech (AMD) could rally

• Energy (Chevron) could be flat or down

• Financials (Goldman Sachs) could lag

In a traditional worst-of structure, that lagging name dominates.

But here:

• A single strong performer can offset weakness elsewhere

That asymmetry improves the probability of preserving capital over time.

Income Generation: 10% with Memory

The note offers:

• 10% per year (2.5% quarterly)

But importantly:

• Income is only paid if the worst-performing stock is above 60%

If it isn’t:

• You don’t lose the coupon

• It is stored (“memory”) and paid later if conditions recover

This is a subtle but powerful feature.

Markets often dip temporarily, and this structure allows you to still benefit if recovery occurs.

Early Exit: Getting Paid Sooner

Every quarter, the structure checks:

Are all three stocks at or above their starting levels?

If yes:

• The note is automatically redeemed early

• You receive 100% of your capital + coupons earned

This is known as the autocall feature.

In stable or slightly rising markets, this can significantly boost annualized returns.

The Underlying Companies — Not Random Selections

Another important point: this is not a random basket.

Each company has a distinct role:

• Goldman Sachs

  A globally dominant investment bank with a strong franchise and deep institutional relationships, positioned to benefit from capital markets activity.

  
  

• Chevron

  A disciplined energy company with strong free cash flow generation and exposure to oil markets (think key beneficiary of access to Venezuelan energy), supported by a conservative balance sheet.

  
  

• AMD

  A key player in the AI and semiconductor space, with significant growth potential as demand for computing power accelerates.

  
  

These are three very different businesses, driven by different economic forces- which matters in a worst-of structure.

A Note on Accessibility: Why the Minimum is Only $10,000 USD

You’ll notice this particular structure has a minimum investment of $10,000 USD.

That is relatively low for structured products, and there’s a reason.

These notes are often created through an intermediary structuring process, where:

• A product is designed

• Investors indicate interest over a short window (typically a few days to a week)

• If sufficient demand is reached, the note is issued

Because multiple investors participate in the same issuance, it allows for:

• Lower minimum ticket sizes

• Broader access to institutional-style structures

However, and this is important, accessibility does not equal suitability.

Who This Is Actually Suitable For

Structured products like this are generally intended for investors who meet certain criteria, including:

• Sufficient net worth or income thresholds

• Prior investment experience

• Understanding of derivative-based payoffs

• Comfort with conditional protection (not guaranteed capital)

In other words:

This is not a “plug-and-play” investment- it requires context within a broader portfolio.

Key Risks to Understand

No structured product should be viewed without acknowledging the risks:

• Worst-of risk: One underperforming stock can drive outcomes

• Capital at risk: If the worst name falls below 60% at maturity (and no One-Star trigger), losses occur

• Issuer risk: You are exposed to the creditworthiness of the issuing bank

• Complexity risk: Misunderstanding the structure can lead to poor decision-making

So When Does This Type of Structure Make Sense?

In my experience, this type of note works best when:

• You are not strongly bullish or bearish

• You expect markets to move sideways or gradually higher

• You want to enhance income without taking full equity risk

• You value defined outcomes over open-ended volatility

Final Thoughts

Most structured products are either:

• Too aggressive

• Too narrow

• Or poorly aligned with how markets actually behave

What makes this structure interesting is that it:

• Acknowledges worst-of risk

• But introduces a real-world buffer through the One-Star feature

• While still delivering meaningful income (10%)

It’s not a perfect investment.

But it is a well-designed one, and those are worth paying attention to.

If You Want to Explore Further

If you found this helpful and want to explore whether structures like this fit into your portfolio:

• You can book a discovery session with me at👉 www.wealthwithdaniel.com

• And if you would like more ideas like this, you can👉 join my mailing list on the same site.

  
  

As always, the goal is not just to find opportunities, but to ensure they fit within a broader, well-constructed portfolio.

-Daniel Tittil, CFA, CAIA, MSc.

Lead Advisor at WealthwithDaniel.com 

Chief Investment Officer at Legacy Wealth Management (Cayman) Ltd.

Portfolio & Wealth Manager, Director at Admiral Capital