CB Practical Tutorial: How to Read a CB's ID Card? (Part 1) — Understanding Your Capital Protection Baseline

In the previous article, we learned that a Convertible Bond (CB) is like a perfect hybrid of "downside insurance and upside lottery." Since every insurance policy has different payout conditions, every convertible bond naturally has its own specific issuance terms!

cb lab has extracted the most critical metrics for you, condensing them into a clear "CB ID Card".

In this first part, we will focus on the "defensive side," teaching you how to understand the capital protection data as a bond. We will directly use the CB Important Info Component in the cb lab Technical Analysis Page for our practical tutorial, allowing you to get hands-on seamlessly as you read!

Core Section: The Capital Protection Data as a "Bond"

In the important info panel, the critical data related to your "capital protection baseline" is mainly located in the Basic Info and Date Info sections of the UI.

1. Face Value and Coupon Rate (Will it pay you interest?)

• Face Value: In Taiwan, the face value of the vast majority of convertible bonds at issuance is 100,000 NTD (per lot). This is also the "guaranteed" money the company must pay you back when the bond matures.
• Coupon Rate: A major characteristic of Taiwanese convertible bonds is that the coupon rate shown on the panel is usually 0%. This means investors will not receive annual interest payments by holding it. Why do people still buy it if there's no interest? Because investors are eyeing its "lottery" value—the ability to convert it into stock and earn capital gains in the future!

2. Credit Rating and Guarantee (Will the company default?)

The biggest fear when buying a bond is the company going bankrupt and failing to repay. Here, you should look at two indicators in the first column of the panel:

• Guarantee Status:
  • Secured: Usually guaranteed by a bank. Even if the issuing company unfortunately goes bankrupt, the bank will compensate you, making the risk extremely low.
  • Unsecured: The panel will display "None". This means there is no bank endorsement; the bond is issued purely based on the company's own credit.
• TCRI (Taiwan Corporate Credit Risk Index):
  • If you are buying an "unsecured" convertible bond, you must look at this number! The smaller the number, the better the credit and the lower the probability of default. Generally speaking, a TCRI of 1 to 4 belongs to the top tier with strong financial health.

3. Life Cycle (When does this policy expire?)

Please turn your attention to the fourth column of the panel:

• Issue Date & Maturity Date: The lifespan of Taiwanese convertible bonds is usually 3 or 5 years. The maturity date is when the contract ends, and the company must return your 100,000 NTD principal.
• Remaining Days: This is a very practical dynamic indicator! The shorter the remaining days, the closer you are to the day you "get your principal back." As long as the company doesn't go bankrupt, the bond price is more likely to gravitate towards 100 (face value). You can keep an eye on this number at any time to assess how long your funds need to be parked.

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Practical Example: Using "Phison 3 (82993)"

Seeing is believing. Below, we load the real-time important info panel for "Phison 3". You can see for yourself where its defensive baseline lies:

1. Look at Basic Info first:
   • We see the underlying stock is Phison.
   • Guarantee Status: Displayed as "None".
   • TCRI Credit Rating: Displayed as 3! This means that as a global flash memory controller chip giant, even without a bank guarantee, Phison has excellent financial health and credit, making the default risk very low.
   • Coupon Rate: Displayed as 0%, a standard Taiwanese convertible bond configuration.
2. Look at Date Info next:
   • We can see its Maturity Date is 2031-02-06.
   • Glancing at the Remaining Days, the screen shows there are about 1600+ days left (this data automatically decreases over time). This means there is still a long time until maturity, giving the company ample time for its stock price to perform. At this stage, investors do not need to worry at all about the bond maturing soon.

Summary: Through these two columns, we have completed the defense check for "Phison 3": This is a bond with excellent credit and an extremely low probability of company default, despite paying no interest. Knowing that the worst-case scenario is just this, can we sleep peacefully now?

No! Don't forget we buy convertible bonds to make big money! In the next article, we will turn our attention to the panel's Price Info, teaching you how to understand the conversion price and premium rate, and master the most fascinating "stock attack power" of convertible bonds!

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What's Next?

After reading this article, if you already have the basics of filtering safe convertible bonds but don't know where to start picking targets or how to avoid landmines?

Welcome to join the cb lab Telegram Channel for free! Every day, we share the latest curated strategies in the channel. Follow us to steadily profit in the stock market using data and statistics!

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If you are already very familiar with how convertible bonds work, don't hesitate! Head over to our Latest CB Data List now, and use the powerful filters and technical analysis charts to uncover the next high-defense potential target!