Think of volatility as the arc of a child’s swing, gentle pushes produces mild euphoria, perhaps a giggle or two. But to get the squeals of joy/terror dependant on age of child, you would have to increase the arc/volatility of the swing. Now think what catalyst creates the change in volatility or rate of swinging. Usually it’s a bigger, stronger person or in the case of BAC, the bevy of legal issues that awaits it as the year progresses.
If the stock price is below issue price but above threshold you will receive seven quarterly payments of 2.5% to 3% on the issue price of $10. There is also an “early escape clause in case we miscalculated” that says if on one of the seven magic days, BAC is above the original offering price you will be repaid your investment plus the quarterly fee due. Game over. We're taking our ball and going home. Having the temerity to win, is just not good form.
But this is the best part – if on the 7th magic day, 7th heaven? Isn’t there a story somewhere about 7 virgins? I digress. If on the 7th magic day, the price is below the threshold, you get to “participate” in the DEPRECIATION of BAC. If the price is down 25% - you will receive 25% less than you put in. So no price appreciation participation, but what you DO get..., is the opportunity to spin the barrel and pull the trigger, SEVEN TIMES. With a SIX shooter!
- · We may engage in business with or involving Bank of America Corporation WITHOUT regard to your interests.
- · Hedging and trading activity by our subsidiaries could potentially adversely affect the value of the securities.
- · The U.S. federal income tax consequences of an investment in the securities are uncertain.
The complexity of financial investments is designed in favor of the issuer, not the buyer.