Investors were sold bonds linked to Apples share price as it neared its 2012 high of 700$. Now, bonds are considered safer than stocks. And these 1 year bonds yielded 10%. So what is not to like? Or where is the beef, as our Jinx would say.
Re: How bondholders lost their shirt with Apple's succombing to gravity
These products were sold to investors by investment banks such as JPMorgan UBS BARCKAYS and Morgan Stanley.
What is the catch? If Apple stocks price after 1 yr is at or above price when bonds issued investors get to keep the 10% interest and get back the Principal. But if Apple share price fell more than 20% in a year the bonds change into apple shares. So if you invested 700$ at all time high, and one yr later stock at 560 your bonds get converted to one apple share worth 560. So you bought bonds but got treated like a stockholder.
So beware of artificially high interest rarest. If a deal seems complex stay away.
The investment banks essentially have hedged their Apple position. So if it goes down they make money.
Re: How bondholders lost their shirt with Apple's succombing to gravity
Source Jan 26 wsj.
Re: How bondholders lost their shirt with Apple's succombing to gravity
I think correct spelling is succumb not succomb in title.