Reverse Convertible Thematic Ideas

This UBS report highlights tactical opportunities for using Reverse Convertibles (RCs) to generate yield or acquire stocks at a discount during periods of high market volatility. It identifies attractive candidates across themes such as AI, Longevity, and European Leaders.

Key Takeaways

• 1.Reverse convertibles (RCs) provide a mechanism to generate additional yield or build equity exposure at lower price levels ('buying on dips').
• 2.Implied volatility in equity markets remains elevated due to ongoing geopolitical uncertainty, making the yield on RCs more attractive.
• 3.UBS uses a machine learning model to rank stocks for RC selection, prioritizing those with high volatility relative to peers and positive momentum.

Table of Contents

• Introduction
• Stock selection approach
• What is a reverse convertible?
• Key features of investing in reverse convertibles
• Risks associated with reverse convertibles
• Required Disclosures
• Equity selection system
• Global asset class preferences definitions
• Risk information

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