Method of and system for protecting an initial investment value of an investment

• US 8,209,252 B1
• Filed: 11/25/2008
• Issued: 06/26/2012
• Est. Priority Date: 08/29/2007
• Status: Active Grant

• Current Assignee: Barclays Execution Services Ltd. (Barclays PLC)
• Original Assignee: Barclays Bank PLC (Barclays PLC)
• Inventors: Koo, Samson, Douglas, Stephen
• Primary Examiner(s): Akintola, Olabode
• Application Number:
  US12/323,181
• Time in Patent Office: 1,309 Days
• Field of Search: 705/36.R
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method of protecting at least a portion of an initial investment value of an investment made by one or more investors, comprising the steps of: (a) determining using an option-based instrument calculator: (i) a first value of a first set of put option-based instruments at initial investment in the first set of put option-based instruments, the first set of put option-based instruments having a first underlying reference; (ii) a second value of a first set of call option-based instruments at initial investment in the first set of call option-based instruments, the first set of call option-based instruments having a second underlying reference, the first underlying reference being the same as or substantially correlated to the second underlying reference; and (iii) a third value of a second set of option-based instruments at initial investment in the second set of option-based instruments, the second set of option-based instruments having a third underlying reference; so that the sum of the first value, the second value, and the third value is less than the initial investment value; (b) holding positions using a regulated investment company in the first set of put option-based instruments, the first set of call option-based instruments, and the second set of option-based instruments, so that the first set of put option-based instruments and the first set of call option-based instruments provide the at least a portion of the initial investment value at maturity of the investment; and (c) making available the at least a portion of the initial investment value to the one or more investors upon the maturity of the investment.

Claims

1. A method of protecting at least a portion of an initial investment value of an investment made by one or more investors, comprising the steps of:

(a) determining using an option-based instrument calculator;

(i) a first value of a first set of put option-based instruments at initial investment in the first set of put option-based instruments, the first set of put option-based instruments having a first underlying reference;

(ii) a second value of a first set of call option-based instruments at initial investment in the first set of call option-based instruments, the first set of call option-based instruments having a second underlying reference, the first underlying reference being the same as or substantially correlated to the second underlying reference; and

(iii) a third value of a second set of option-based instruments at initial investment in the second set of option-based instruments, the second set of option-based instruments having a third underlying reference;

so that the sum of the first value, the second value, and the third value is less than the initial investment value;

(b) holding positions using a regulated investment company in the first set of put option-based instruments, the first set of call option-based instruments, and the second set of option-based instruments, so that the first set of put option-based instruments and the first set of call option-based instruments provide the at least a portion of the initial investment value at maturity of the investment; and

(c) making available the at least a portion of the initial investment value to the one or more investors upon the maturity of the investment.

2. The method of claim 1, wherein the regulated investment company is of a type selected from the following list of regulated investment company types:

unit investment trust, close-ended fund and open-ended fund.

3. The method of claim 1, wherein the first set of put option-based instruments and the second set of option-based instruments are issued by the same entity.

4. The method of claim 1, wherein the first set of call option-based instruments and the second set of option-based instruments are issued by the same entity.

5. The method of claim 1, wherein the first set of call option-based instruments are issued by an entity that is different from an entity that issues the first set of put option-based instruments.

6. The method of claim 1, wherein the first set of call option-based instruments are issued by an entity that is different from an entity that issues the second set of option-based instruments.

7. The method of claim 1, wherein the first set of put option-based instruments are issued by an entity that is different from an entity that issues the second set of option-based instruments.

8. The method of claim 1, wherein the calls and puts are each of a type selected from the following list of call and put types:

registered warrants, over-the-counter options, exchange traded options, forward contracts, exchange traded market-linked notes, publicly registered market-linked notes, other types of market-linked notes, exempt securities, certificates of deposit, and private placement instruments.

9. The method of claim 1, wherein the regulated investment company holds a diverse set of stocks and securities.

10. The method of claim 9, wherein the diverse set of stocks and securities are held in the form of options or a financial instrument the value of which varies based on an index calculated based on the diverse set of stocks and securities.

11. The method of claim 1, wherein the regulated investment company holds a long position in the first set of put option-based instruments and a long position in the first set of call option-based instruments.

12. The method of claim 1, wherein the regulated investment company holds a short position in the first set of put option-based instruments and a short position in the first set of call option-based instruments.

13. The method of claim 1, wherein the regulated investment company holds a long position in the first set of put option-based instruments and a short position in the first set of call option-based instruments.

14. The method of claim 1, wherein the regulated investment company holds a short position in the first set of put option-based instruments and a long position in the first set of call option-based instruments.

15. A computer system for protecting at least a portion of an initial investment value of an investment made by an investor in a financial product offered by a regulated investment company comprising:

(a) a processor;

(b) a computer-readable storage medium that stores data relating to the investment which is operatively connected to the processor;

(c) an option-based instrument calculator that determines values of;

(i) a first value of a first set of put option-based instruments at initial investment in the first set of put option-based instruments, the first set of put option-based instruments having a first underlying reference;

(ii) a second value of a first set of call option-based instruments at initial investment in the first set of call option-based instruments, the first set of call option-based instruments having a second underlying reference, the first underlying reference being the same as or substantially correlated to the second underlying reference; and

(iii) a third value of a second set of option-based instruments at initial investment in the second set of option-based instruments, the second set of option-based instruments having a third underlying reference;

so that the sum of the first value, the second value, and the third value is less than the initial investment value; and

(d) a hedging manager that generates a set of instructions to be executed on the processor for holding positions using the regulated investment company in the first set of put option-based instruments, the first set of call option-based instruments and the second set of option-based instruments, so that the first set of put option-based instruments and the first set of call option-based instruments provide the at least a portion of the initial investment value at maturity of the investment.

16. An apparatus comprising:

(a) a processor;

(b) a computer-readable storage medium that stores data relating to an investment, the computer-readable storage medium operatively connected to the processor, wherein the data comprises;

(i) a first value of a first set of put option-based instruments at initial investment in the first set of put option-based instruments, the first set of put option-based instruments having a first underlying reference;

(ii) a second value of a first set of call option-based instruments at initial investment in the first set of call option-based instruments, the first set of call option-based instruments having a second underlying reference, the first underlying reference being the same as or substantially correlated to the second underlying reference; and

(iii) a third value of a second set of option-based instruments at initial investment in the second set of option-based instruments, the second set of option-based instruments having a third underlying reference;

wherein the sum of the first value, the second value, and the third value is less than an initial investment value; and

(iv) positions held by a regulated investment company in the first set of call option-based instruments, the first set of put option-based instruments and the second set of option-based instruments, so that the first set of put option-based instruments and the first set of call option-based instruments provide at least a portion of the initial investment value at maturity of the investment.