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A-shares such as Gree Convertible Bonds 110030
Convertible Bonds, the full name is Convertible Bonds (CB),
used to only have convertible corporate bonds in the market, but now Taiwan already has convertible bonds. Convertible bonds are not stocks! It is a bond, but the person who buys the convertible bond has the right to convert it into stock in the future.
Simply use convertible corporate bonds to illustrate that A listed company issues corporate bonds, indicating that creditors (that is, bond investors) can hold bonds for a period of time (this is called a lock-up period) after holding the bonds to exchange company A for shares of company A. The creditor is transformed into the owner of the shareholder identity. The conversion ratio is calculated by dividing the denomination of the bond by a specific conversion price. For example, if the denomination of bonds is 100,000 yuan, divided by the conversion price of 50 yuan, you can exchange for 2,000 shares, which is 20 lots.
If the market price of company A's stock has risen to 60 yuan, investors must be happy to convert, because the conversion cost is 50 yuan, so immediately after the stock is exchanged, it is sold at the market price of 60 yuan, and each share can earn 10 yuan, a total profit of 10 yuan. to 20,000 yuan. In this case, we call it having conversion value. Such convertible bonds are called in-the-money convertible bonds.
On the other hand, if the market price of company A's stock has fallen to 40 yuan, investors must be reluctant to convert, because the conversion cost is 50 yuan. , it should not be converted at a cost price of 50 yuan. In this case, we call it no conversion value. Such convertible bonds are called out-of-the-money convertible bonds.
At first glance, out-of-the-money convertible bonds may seem unfavorable to investors, but don't forget that it is a bond and has a coupon rate to receive interest. Even zero-coupon bonds have discount subsidy benefits. Because of this characteristic of convertible bonds, in the event of bad news, its market price will stop falling to a certain extent. The reason is that its bond nature provides protection for its value. This is called Downside protection.
Therefore, convertible bonds have dual personalities in the market. When the price of the underlying stock rises very high, the equity of the convertible bond is particularly heavy, and its delta value is almost equal to 1, that is, if the underlying stock rises by one yuan, it can also rise nearly One yuan. However, when the price of the underlying stock falls badly, the bond personality of convertible bonds emerges, allowing investors to still have debt interest to collect, which can protect investors.