Really stupid question

Discussion in 'Professional Trading' started by lasner, May 2, 2011.

  1. lasner


    I have a question about bonds. I've never traded them. If you invest in them can you make money off of the price that you entered if you hold it to maturity.

    I realize you can day trade them and make money off of the price but if you earn interest and hold the bond or note to maturity can you make money off of the price that you entered. Similar to the way you would a stock.
  2. This really is a very stupid question.

    You can make money as long as the bond issuer wouldn't default. If they default, you lose everything. If the issuer was financially strong to begin with, they wouldn't had to issue the bond. And you don't really want to buy bonds from a weak company either.
  3. jokepie


    you forgot about inflation and interest rate changes ..?
  4. Just because they bond defaults doesn't mean the bond goes to zero.. obviously it gets a big haircut but bondholders have higher priority in a bankruptcy event than equity holders... You might get 10-30% on the dollar.

    In the case of a default of a Country's bonds, a lot of times they massively sell-off and an intervention or restructuring offers value to those who pick them off ...
  5. sjfan


    Which part of this is the question you ask?

    You can buy and sell them on secondary markets. And/Or, You can hold them to maturity and earn yield (not coupon).