Convertibles provide the upside potential of common stock and the downside protection of a bond.

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Convertibles are hybrid instruments that offer investors the opportunity to benefit from share price appreciation, while also providing the protection of a fixed income security if the share price falls. The convertible bond holder has the right to convert the bond into a predetermined number of shares of the issuing company's stock at a specified price, usually at a premium to the current market price. This provides the potential for capital appreciation if the stock price rises, while also offering a fixed yield if the stock price falls.

Convertibles Provide the Upside Potential of Common Stock and the Downside