Risk To Consider
- The price of the reference shares may decline during the term of the note, which will affect the investor negatively, while the investor does not have the same price appreciation potential as the reference shares, because at maturity the most the investor will receive is his original principal amount.
- Investors selling notes prior to maturity may receive a market price which may be higher or lower than par value, not necessarily reflecting any increase or decrease in the market price of the underlying equity.
- Reverse convertibles do not guarantee return of principal at maturity.
- The market price of the Reverse convertibles may be influenced by unpredictable market factors.
Read more about this topic: Reverse Convertible Securities
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“The effect of liberty to individuals is that they may do what they please: we ought to see what it will please them to do, before we risk congratulations.”
—Edmund Burke (1729–1797)