What is the meaning of PERCS?

PERCS means Preference Equity Redemption Cumulative Stock. Preferred stock in Corporation A that behaves on the downside like common stock in Corporation A, but contains an embedded short Call Option on that stock. The' PERCS' is a descendant of the Prime of the early 1980s, which was itself a descendant of the hoary Buy-Write (q. V.) strategy. (See Pratt, Tom. "You can't keep a lid on public derivatives." IDD, Oct. 24, 1994, pp. 12-18.) The PERCS is like a ELKS (q. V.), except that the company that the company that issues the stock issues the PERCS, and another company issues the ELKS. Morgan Stanley issued the first PERCS in 1991. 3. 375.