Convertible Bond Trading?

Discussion in 'Options' started by Wolfgang1756, Nov 23, 2009.

  1. From what I have read, it seems that convertible bonds are just plain corporate bonds which pay interest but with built-in long term options. Is this correct?

    How can I buy and sell these? Are they as easy to buy/sell as options?

    Can you get them for all big corporations? Like Intel or Apple?

    Sorry if these are silly questions!

  2. tman


    There are not real liquid, especially in small size. Call your broker to get a quote and size.
  3. They are liquid for institutional investors (depends on issue, name etc)... As far as I know, the only way retail investors can access these is through convertible bond mutual funds.
  4. yes. and you're a smart guy wanting to go down this path.

    only problem is for you this is a OTC business, you need to work on a bank desk to get the best deals and know the best book runners to get good allocations.

    convertible arbitrageurs have had a great year. the mother strategy is long the convertible bond, short the equity. think about it. you hedge the credit risk with CDS, hedge some gamma with the options and futures and you're set to print money.
    Butterball likes this.
  5. Corporate bonds can be bought by anyone, so why are convertible bonds any different? I don't mean to be rude but I think you are mistaken.

    Yes it is OTC because there is no exchange for bonds. But I am taking about bonds that companies like Intel and IBM issue every few years. However the "convertible" ones can be converted to ordinary shares.

    So how can one buy and sell these? Any way to find the CUSIP numbers?
  6. Bloomberg
  7. I just found this article on the web which says:-

    "For example, Intel, the computer chip giant, issued a convertible bond in December 2005 that pays 2.95% a year until December 2035. Then, as now, a 2.95% rate wasn't too enticing. T-bonds yielded more.

    But this Intel bond can be converted to 31.72 shares of Intel stock per $1,000 face value of the bond. At Intel's current price, a bit under $21, the conversion isn't worthwhile. But if Intel stock climbed above $31.53, the conversion would be lucrative."

    So obviously it must be easy to buy and sells these option like bonds, right?

    The article is here:-
  8. CUSIP is 458140AD2... Go for it, knock yourself out.
  9. I searched all of Bloomberg and no luck :( It just has stock prices - no bonds prices whatsover.

    Its not a nice site to navigate anyway. I don't like it personally. I much prefer Yahoo Finance...
  10. Thanks! Sadly nothing comes up with that CUSIP at my broker - IB. :mad:

    Thanks anyway to everyone. I appreciate all your help. This is a great forum!

    I will find a way... it can't be that hard. I know you can buy corporate bonds for as little as $1000 or so...
    #10     Nov 23, 2009