Profit While Waiting For Share Prices To Drop

While waiting for equity market to correct, investors can enter into fixed coupon note (FCN) to earn 8% per annum.

If investor is comfortable to buy any of the underlying stock in the FCN at respective strike price, they should go for it. It is not easy to find 8% yield per annum.

Risk to investors is to buy into worst performing stock at strike price.


Below is an example of a FCN.

FCN details:
Underlying: Nike, Alphabet Class A, Starbucks
Strike: 93.12%
Knock out: 100%
Coupon: 8%
Tenor: 6 months
Knock In: 80% (protection)
Notional: USD
Enter at average of open and close


Below shows the earnings trend for Nike, Alphabet and Starbucks.

All have rising earnings trend. Long term direction of share price follows the earnings trend of the company. Hence we are not afraid of converting into any of the 3 stocks.

Risk to investor is to buy the worst performing stock at strike price.


Few scenarios that can happen:

- All the 3 stocks are above knock out price after 1st valuation month, investors will get back principal and pro-rated coupons.

- None of the stock trades below 80% throughout the tenor of 6 months, the note will not have risk of converting to either of the stocks.

- One of the stock drops below 80% during the tenor of 6 months, but all the 3 stocks are above strike price at the end of valuation month. Then investor receives principal and pro-rated coupons.

- One of the stock drops below 80% during the tenor of 6 months and stay below strike price at the last valuation date, the note will be converted to worst performing stock.


These are the stocks in the proposed FCN (fixed coupon note).