Reason for joy for the shareholders of Covestro (DE0006062144): Positive comments from management, the figures for the third quarter exceed the (high) expectations of the analysts. The EUR 450 million capital increase planned in connection with the EUR 1.6 billion acquisition of DSM Resins initially upset the market, but the price drop has already been made up. Those who want to enter defensively will find interesting conditions for certificates and reverse convertibles due to the relatively high volatility.
Discount strategy with 9 percent buffer (December 2020)
The SG discount certificate with ISIN DE000SB5BKW6 offers a safety buffer of 9 percent at a price of EUR 40.55. The maximum amount (cap) of 42 euros results in a potential return of 1.45 euros or 17.7 percent p.a. If the share closes below the cap on December 18, 2020, investors will receive one Covestro share.
Bonus strategy with a 20 percent safety buffer (March 2021)
The bonus certificate with cap from HVB (ISIN DE000HR1DPR5) has a bonus amount and cap of 48 euros. If the barrier of 36 euros (buffer 20 percent) is never touched or undercut by the valuation date (19.3.21), investors receive the bonus and maximum amount. At a purchase price of 44.59 euros, the maximum profit is 3.41 euros, which is a return of 17 percent p.a. corresponds. Particularly interesting: the certificate is as expensive as the share (no premium risk).
Income strategy with 10 percent buffer (June 2021)
The reverse convertible bond from BNP Paribas (ISIN DE000PX5RSB6) pays a coupon of 9 percent p.a. regardless of the Covestro price development. Due to the entry price just below par, the effective return is 9.3 percent p.a. If the share closes at or above the base price of EUR 40 on the valuation day (6/18/21), investors also receive back the full nominal amount; otherwise you will receive the delivery of 25 shares according to the subscription ratio (= EUR 1,000 / EUR 40).
Report conclusion: The certificates and the reverse convertible bond are aimed at risk-conscious equity investors who expect a sideways movement and / or a decline in volatility at Covestro and would like to benefit from it. When choosing the right strategy, personal risk tolerance and income expectations must be weighed.
This article does not constitute a recommendation to buy or sell Covestro shares or investment products based on Covestro shares. No liability is assumed for the accuracy of the data.
Author: Thorsten Welgen
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