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SE - CWB: The Bubble In Call Options Has Stoked A Bubble In Convertible Bonds
Sea Limited American Depositary Shares each representing one Class A
For most investors, convertible bonds are a less popular fixed-income asset class. These are bonds that offer conversion to stocks given a significant rise in the underlying equity's value. This is very similar to an out-of-the-money call option and comes with the cost of a generally lower yield.
Most convertible bonds, such as those in the popular ETF (CWB) are in younger technology sector companies since many of those companies have poor cash-flow, but high equity growth potential. Tesla's bonds are one of the largest and makeup about 10% of CWB's holdings. Other