The CSI 500 index has been in a low valuation range for the last year, with a limited decline, so most snowballs are profitable. Many banks also buy snowball products instead of customers, and the scale of snowball products is growing. Snowball structure is an off-site option. Brokers rely on the basis difference between CSI 500 index and futures spot to return to high selling and low sucking to make money. The trading desk calculates the volatility of the CSI 500 index according to the model and gives the quotation of snowball structure. As long as the volatility of the index remains at a high level, we can get excess returns by throwing high and sucking low. Then pay the agreed interest to the customer. For example, the knock-in and knock-out limit is 80- 103. If the index has been fluctuating inside, the fluctuation range is at most 23%. If the volatility is at a high level, there are enough opportunities to sell high and suck low, gain income, and then the futures side hedges the risk. Brokers will quote an affordable coupon according to the volatility. In essence, customers have sacrificed their sharply rising income, and brokers have provided customers with part of the bottom.

Snowball is an asset management product or OTC option with snowball structure. It is an option combination structure and an obstacle option, which improves the downside protection (safety interval) and provides higher fixed coupon income. In other words, snowball is an OTC option structure, which can hook many OTC targets. The essential logic of subscription is that the linked target fluctuates or fluctuates upward within the range above the knock-in barrier price (such as 75% of the initial price) within the agreed period. As long as the price of the linked target does not touch the knock-in barrier price or falls below the knock-in barrier price but does not rise above the knock-out barrier price, the agreed fixed income can be obtained. Generally, the agreed return is a trader based on OTC options (mainly securities).

What is CSI 500 Index?

CSI 500 Index, also known as CSI Small-Cap 500 Index, is an index developed by CSI Index Co., Ltd. The stocks in the sample space are composed of the top 500 stocks with total market value excluding the components of CSI 300 Index and the top 300 stocks with total market value, which comprehensively reflects the stock price performance of a number of small and medium-sized companies in China A-share market.