An arbitrage strategy which involves buying a convertible security while simultaneously selling short the same firm's common stock. This strategy involves identifying stocks that are mispriced by the market, shorting the stock and buying a convertible security issued by that firm. Having sold the stock short, the investor puts proceeds in an interest-bearing account. If the stock price stays the same, then the investor will earn interest on the short sale proceeds and interest on the convertible security, while paying fees to the lender of the stock. In most cases, this situation will lead to a positive net cash flow.
So, knowing this, we’ll have to pay attention to the bond market too, if we try to interpret the price action of certain stocks. Of course this kind of action is attracting other professional shorters and than suddenly you have stocks halving in price in a couple of sessions.
So, knowing this, we’ll have to pay attention to the bond market too, if we try to interpret the price action of certain stocks. Of course this kind of action is attracting other professional shorters and than suddenly you have stocks halving in price in a couple of sessions.
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