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Medium

Risk
Yield
Enhancement
Reverse Convertible on TSLA
Investment Terms
Issuer RBC
Notional- $1,116,000.00
Unit Size-1116 units
CUSIP- 78010UF28
Underlying- Tesla Motors,
Inc.
Pricing date- 6/26/2014
Maturity data-9/30/2014
Max Return- 113.75%
Minimum Return- 0%
Issuer Details
Issuer - RBC
S&P Credit Rating.
Market capitalization 115
Bn
CDS 5y spread 70 bps
Investment underlying opportunity: Tesla Motors, Inc. (TSLA) stock had been performing well
over the last few months. The stock rose from $149.56 to $224.54 by July 24
th
, 2014 increasing
almost 50% since January. This is due to variety of new strategic developments that have resulted
in the stock price growth. Notable news the open sourcing of its patents and the introduction of
the CUV known as Model X and a smaller sedan known as the Model III. This stock might pull
back temporarily but has good potential for appreciation. This would suggest stock has high
probability to move with in a narrow range.
Further analysis
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Risk Return Dashboard
Expected
Return
12.883 %
Volatility 16%
Risk Score 3
Capital
Guaranteed
No
Maximum
Loss
100% of
investment
Performance Measure
Expected
Return
High
Market Risk High
Issuer Risk Low
Complexity Low
TSLA statistics
Beta 1.37
P/E N/A
RoE -18.7%
Current Ratio 1.9
Leverage Ratio 3.6
Altman's Z-Score 10.36
Dividend Yield 0.0
Total Debt/Equity 0.91
Structured note investment underlying
has beta of 1.37, the Z-score
is 10.36, and it has high debt
to equity.
Currently TSLA shares are at $223.54 its
competators Toyota( TM ) , General Motors (GM)
and Ford (F) are at $119.38, $35.74 and $19.60
respectively.
This is a company that is about 4 years old.
This note has three months to maturity.
The expected return is good. Reverse
convertible has a payoff similar to
a covered strangle position. This
position pays limited amount on
the upside with potential to loss
all of the initial investment . This is a
good investment if the underlying
stock moves with in a narrow range.
Investment Metrics
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-35
-30
-25
-20
-15
-10
-5
0
5
10
15
-100 -50 0 50 100 150 200 250
Note Return
Note Return
Note Performance
(Historical)
Note Performance
(Future Stress test)
Return 12.883% per annum 12.883 per annum
Note Payoff 113.75 113.75
Probability of Gain 94.8 94.8
Risk Score 3 3
Volatility 16% 16%
Probability of Loss 5.18 5.18
Expected Maturity 3 months 3 months
This note has returned 12.883% per annum historically with a probability of gain of 94.8.
Therefore from a mathematical perspective, this note is most certain to deliver the
expected return without losing the principal.
Investment Performance
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-100
-50
0
50
100
150
200
250
6/29/2010 1/15/2011 8/3/2011 2/19/2012 9/6/2012 3/25/201310/11/20134/29/2014
Historical Analysis
Asset performance
Note Return
Recommendation: Metrics and historical analysis concludes this investment is a risky one for a
conservative investor. In current market environment for an adventurous investor this investment will
definitely help to obtain 12.883% per annumwith protection up to a 20% decline in the stock price.
Pros Cons
Note provides a coupon of 12.883%
as long as note is above 80% of initial
level
Note offers exciting opportune
exposure to Tesla Motors stock
Note offers a pre packed approach to
combine a covered call and covered
put strategy.
Note has potential to loss entire
invested principal if markets decline
below 80% of initial level
Historically this note has lost money
many times
If the stock performs extremely well
or bad then note returns are limited
on upside to losing all of the invested
amount
Score Card: Reverse Convertible on Tesla
Market Direction (SP 500):
Market Vol (SP 500):
Underlying Direction:
Underlying Vol:
Issuer Credit (CDS):
Investor Risk Appetite:
Investment Recommendation
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Disclaimer: This report is prepared by Gatick Global solutions team. This is
not an investment advise.
Contact Details:
Karthik Misra and Chandra S Khandrika for further details and questions
Bearish Bullish
Low High
Bearish Bullish
Low High
Low High
Low High