A structured note that usually guarantees capital (hence the name: capital protection note). This note secures a future payment of the greater of two values: 1) the initial investment (principal amount invested) or 2) participation in the underlying market.  The holder can get a complete downside protection and an extent of upside participation in an index or in a particular stock (the underlying) over a specified period (the note’s term: usually 3-10 years). The performance of the note is typically stable, but will still be impacted by inflation observed over its term.  Everything else held constant, the note would not be affected by the way the market performs. However, the holder can participate in any upside potential if the market performs well. Underlying investments can include stock market indexes, mutual funds or hedge funds, etc. This note has many nomenclatures including a return note, a linked note, or for short as a PPN.

A protected note may also be a partially protected note such as a non-principal protected note (NPPN) where return is enhanced if the underlying equity appreciates in value- upside potential; and there could be varying levels of capital / principal protection if the underlying loses value- partial downside protection. A holder can customize the level of upside participation and required exposure to equities, as well as the amount of downside protection desired.