UBS reverse convertible breaches barrier as Research In Motion shares plummet
The dramatic fall in the price of Research In Motion shares has inflicted capital losses on investors who took a stake in this six-month reverse convertible from UBS. Stability towards the end of the term was not enough to keep the underlying from sliding by less than 1% below the European 70% barrier. Reasonably high coupons mitigated the losses
This UBS six-month reverse convertible was linked to the common stock of BlackBerry maker Research In Motion. The product was reviewed in the June 2013 issue of Structured Products and paid a monthly income with an annualised coupon of 27.27% - equivalent to 13.635% throughout the term. Reverse convertibles offer the best returns when volatility levels are high because the premium generated from selling the put option is at its highest.
While the high headline yield was tempting, the investment
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