Group 1: Common Option Structures - The three common option structures—Snowball, Phoenix, and Fixed Coupon Notes (FCN)—are essentially barrier options, with specific characteristics regarding cash flow and risk exposure [2][3]. - The classic Snowball structure allows for cash flow only at maturity or upon knock-out, while the Phoenix structure enables monthly cash flow as long as the price is above the knock-in line [2]. - FCN provides fixed coupon payments regardless of price movements during the holding period, making it attractive for conservative investors due to a significantly lower probability of knock-in [2]. Group 2: Profit and Loss Scenarios - In scenarios without knock-in, all three structures yield similar returns, with higher coupon structures being more favorable [3]. - In cases where knock-in occurs but knock-out does not, Snowball and FCN can still yield returns, while Phoenix's cash flow is affected by the knock-in event [3]. - If knock-in occurs and the asset price is below the exercise price at maturity, losses may occur, with Snowball being the most adversely affected due to no cash flow during the holding period [3]. Group 3: Risk and Return Dynamics - The risk-return relationship indicates that Phoenix typically offers lower coupons than Snowball, while FCN generally has the lowest coupon rates [4]. Group 4: Market Timing Considerations - Proper market timing is essential, as no option structure guarantees profit in all market conditions [5]. Group 5: Delta and Volatility Analysis - All three structures maintain a positive Delta, indicating a bullish stance on the underlying asset, and are more suitable for moderate upward or sideways markets [7]. - The expected volatility is positively correlated with coupon rates, as higher volatility increases the likelihood of reaching knock-in conditions [8]. - The structures tend to be short volatility in most scenarios, making high volatility periods favorable for entry [10]. Group 6: Selection of Underlying Assets - The choice of underlying assets significantly impacts the performance of the structured products, with the China Securities 500 Index being identified as a suitable candidate due to its risk-return profile [14][16]. - The analysis of daily return distributions shows that the Hang Seng Tech Index has the lowest probability of extreme negative returns, making it a favorable option [14][15]. Group 7: Historical Backtesting and Timing Strategies - Historical backtesting indicates that FCN can effectively mitigate knock-in losses, making it a lower-risk option compared to Snowball [16]. - Rational timing strategies suggest that selecting more aggressive structures during low-risk periods and conservative structures during higher-risk periods can optimize returns [16]. Group 8: Structural Variations and Adjustments - The flexibility in setting barriers allows for various structural adjustments to balance risk and return, such as eliminating knock-in features or adjusting the knock-out thresholds [19].

1. Report Industry Investment Rating No relevant content provided in the report. 2. Core Viewpoints of the Report - Since July, the allocation demand for credit bonds from funds, other product categories, and insurance has increased. Credit spreads have mostly narrowed or remained flat due to strong demand, with 1Y varieties showing strong resistance to decline and lower-rated bonds performing better than higher-rated ones [1][10][11]. - Currently, both credit bond coupons and credit spreads are at low levels, and the market trend is more dependent on institutional allocation demand. It is necessary to closely monitor institutional behavior, buying sentiment, and the potential compression space of credit spreads [1][12]. - Overall, the supply - demand pattern in July is favorable for credit bonds, and there is still a small amount of compression space for credit spreads. Specific strategies include focusing on short - to medium - duration bonds with credit rating sinking, and high - grade 10Y bonds have relatively large potential compression space for credit spreads [3][22]. - In the bank capital bond market, although the spread protection is thin, there is still compression space. Long - duration bonds of large banks and 2 - 3 year bonds of small and medium - sized banks are recommended [5]. 3. Summary by Related Catalogs 3.1. Credit Bond Market Overview - From July 1 - 11, funds' net purchase of credit bonds reached 88.5 billion yuan, a year - on - year increase of 39.1 billion yuan. Other product categories and insurance had net purchases of 31.3 billion and 15.2 billion yuan respectively, with year - on - year increases of 7.8 billion and 5 billion yuan [1][11]. - From July 7 - 11, with the convergence of funds and the rotation of negative factors, the bond market fluctuated upwards. Credit bonds, due to strong allocation demand, saw most credit spreads narrow or remain flat [10]. 3.2. Factors Affecting Credit Bond Market 3.2.1. Institutional Behavior - Fund net trading volume of credit bonds is a sensitive indicator related to credit spread trends. Maintaining a daily net purchase of over 500 million yuan helps keep credit spreads low. From July 7 - 10, the rolling 5 - day net purchase was 1 - 1.4 billion yuan, but it dropped to 740 million yuan on the 11th, and was below 500 million yuan on the 10th and 11th [2][12]. 3.2.2. Buying Sentiment - The TKN成交占比 is used to measure buying sentiment. A stable TKN成交占比 above 75% indicates good buying sentiment. From July 7 - 11, as yields rose, the TKN成交占比 declined, with three days below 70%, but the rolling 5 - day average was around 70% [2][16]. 3.2.3. Potential Compression Space of Credit Spreads - By observing the position of credit spreads relative to the mean - 2 times the standard deviation, it is found that currently, each variety still has a small amount of compression space, with 10Y varieties having relatively large potential [3][22]. 3.3. Specific Bond Types Analysis 3.3.1. Urban Investment Bonds - From July 1 - 13, urban investment bonds had a net financing of 28.8 billion yuan. The primary market issuance sentiment was good, with the proportion of full - subscription multiples over 3 times remaining at 61%. The issuance rate of long - term bonds decreased significantly, with the 10 - year average dropping to 2.14% [30][32]. - In the secondary market, short - term bonds were resistant to decline, while the yields of 3 - 10Y bonds increased. The trading activity decreased, and Shenzhen Metro had many high - valuation transactions [35][38]. 3.3.2. Industrial Bonds - From July 1 - 13, industrial bond issuance and net financing increased year - on - year. The issuance sentiment weakened slightly, and the proportion of long - term issuance over 5 years decreased significantly. The buying sentiment in the secondary market weakened, and the trading duration increased [40][42]. 3.3.3. Bank Capital Bonds - From July 7 - 13, several banks issued secondary capital bonds and perpetual bonds. In the secondary market, yields generally rose, spreads showed differentiation, and low - grade, short - duration bonds performed better. Currently, credit spreads are at relatively low levels, but there is still compression space [45][46]. 3.3.4. TLAC Bonds - By comparing the yields of 3Y, 5Y, and 10Y AAA - secondary capital bonds with TLAC bonds, the spreads are analyzed. As of July 11, 2025, the 3Y, 5Y, and 10Y spreads were 3.1bp, 3.8bp, and 1.4bp respectively, indicating that 10 - year TLAC bonds are more cost - effective [53]. 3.3.5. Commercial Financial Bonds - Since 2021, the valuation of 3Y AAA commercial financial bonds has generally followed the trend of interest - rate bonds, with a stable spread center. As of July 11, the credit spread was 14bp, at a relatively low level [57].