When your available collateral is in the form of stocks or related securities that are marginable (those that would qualify for margin loans) and optionable (those that have publicly traded options), you can discuss with your licensed advisor the possibility of a hedged portfolio stock loan (also referred to as a "HedgeLoan"). An institutional hedged portfolio stock loan that makes use of our enhanced credit facility is one in which you choose to include either a Put, or both a Put and a Call (for a collar arrangement) - that is then structured into your loan document.

The benefit of doing this is that your stock-secured loan can be designed so that should you be forced to default on repayment, the option can be exercised to help limit liability to surrender of the underlying collateral stocks only - even if those shares have fallen greatly in value during the loan term.

The exact option you choose will be a matter for your institutional account advisor and you to decide, but if structured properly, the exercise of the option in default can help ensure that your loan obligation is repaid by simply surrendering the collateral securities - limiting the borrower liability to the collateral shares alone, even when/if the securities' value has fallen dramatically. This is what is referred to as a limited recourse loan.

Though there is of course no guarantee that every option purchased in every hedged portfolio scenario will be sufficient to cover the loan liability of the borrower in default, it is intended to do so. The option exercise will be calculated by your advisor with the end goal of being sufficient to retire the debt with no further claim on other assets.

For ease of reference, please note that a list of publicly optionable securities can be obtained through the Options Clearing Corporation* website.

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