The Real Reverse Convertible Story

A reverse convertible is a short-term investment linked to an underlying stock. They pay monthly or quarterly coupons. Upon maturity there are only 2 scenarios...One-the underlying stock never breaks its downside protection, normally 30%-40%, so you receive your full prinipal amount invested back plus your guarenteed interest. Scenario 2-The underlying stock falls below its 30%-40% protection...i.e a $100 stock at 30% protection must stay above $70 for the length the note is outstanding or else the issuing company-a large bank like Barclays or BNP-has the right to put stock to you. An initial investment of $10,000 i.e. 10 notes cause they are issued at $1,000 increments-with our $100 stock gives the bank the right to put 100 shares of stock to you. So if you stock break $70 and lets say creeps back up and closes at maturity of your note at $75/share, you get 100 shares at $75 which is $7,500 of stock, here lies your risk which is why you get a coupon of 9%-15%. I've purchased more than 10 with 10 different underlying stocks and have always gotten my principal back-do your research and get a broker who knows what he is doing like mine.