In this period of strong increase in volatility, and prolonged declines, certificates are also interesting, especially for an excellent risk-return profile, and in some cases also for any recovery of capital losses, since both coupons and capital gains are considered different income, and therefore compensable with the losses of the fiscal backpack.
Today we focus on the first aspect, going to see a certificate (which I personally purchased in this phase of strong declines) defined as follows:
- Issuer: Leonteq
- Deadline: June 2024
- Underlyings: Meta, Apple (NASDAQ :), Alphabet (NASDAQ 🙂 C (worst of)
- Barrier: fair (valid only on expiry)
- Barrier Value: 60%
- Coupons: monthly (by heart)
- Coupon value: 1% (12% per annum)
- Last price: 951.02
Now, this certificate, I bought it not so much for a yield issue (12% might seem exceptional, but on underlying of this type there are also more profitable ones) but because the values of the strikes and barriers, and of the expiry , make it interesting also from a risk point of view.
In fact, these are the values:
Now, let’s start with the Worst of, which is the title Meta Platforms Inc (NASDAQ :). A stock that has lost more than 63% from the highs of the end of 2021, but although it is falling, at the level of fundamentals, it is growing at a rate of 20.42% per annum (annual EPS growth in the last 5 years), it has an excellent Debt situation. / Equity, an FCF / price return greater than 10%, and is generally solid on the fundamentals side.
The barrier, as you can see (valid for both the coupon payment and the repayment at maturity) is set at 98 Dollars, this means from the maximum that Meta Platforms Inc (NASDAQ 🙂 should lose 75% in the next 2 years (not c ‘is nothing impossible, but let’s say it is quite conservative as a level).
To date, the share is below par, and the autocall mechanism is also interesting …
In fact, the autocall starts from December of this year, so Meta should recover 14% (possible) to make me close the operation at 1010 (having bought below par, and having already taken 2 monthly coupons, it would still be a 5.5 % in about 5 months). If, on the other hand, Meta does not recover this level, the autocall would decrease, passing to 95% from January to June, to 90% from July to December 2023, and even to 85% from January 2024 to the deadline (where I remember the barrier at 60%). I would prefer not to click to continue collecting coupons, however we will see.
Finally, there is the QUANTO clause which makes it covered by any exchange rate risks.
So I repeat, it is not the best certificate of all at coupon level, but considering the other aspects, and above all the quality of the underlyings, it presents an overall excellent risk-return ratio.
For the ISIN code, you can find it in my Telegram channel Breakfast at WS.
Until next time!
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“This article has been written for informational purposes only; it does not constitute solicitation, offer, advice, consultancy or investment recommendation as such does not want to incentivize the purchase of assets in any way. Remember that any type of assets is valued from multiple points of view and is highly risky and therefore, every investment decision and the related risk remain with the responsibility “