Convertible bonds are a special type of bond that not only have the attributes of bonds but can also be traded on the secondary market. In recent years, the convertible bond market has been exceptionally hot and has been widely sought after by various types of investors.

What is a convertible bond?

A convertible bond refers to a bond that the holder can convert into a certain amount of another type of security at a certain ratio or price within a certain period.

Convertible bonds are short for convertible corporate bonds, also known as convertible bonds, which are special corporate bonds that can be converted into common stock under specific conditions at a specific time. Convertible bonds have both debt and equity characteristics.

What are the trading rules for convertible bonds?

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1. Implement T+0 trading

Convertible bonds can be traded on the secondary market, allowing for buying and selling on the same day.

2. Quotation range for call auction

According to relevant regulations, during the call auction phase, the declared price of convertible bonds must not exceed 1.5 times the closing price of the previous trading day, nor be lower than 0.7 times the closing price of the previous trading day.III. Suspension Trigger Rules

If the intraday price of a convertible bond rises or falls by 20%, it will trigger the first suspension of the day, and the suspension will last for 30 minutes. When the convertible bond rises or falls by 30% at one time, it will directly trigger the second suspension, and the suspension will last until 14:57 on the same day.

IV. Conversion Rules

Convertible bonds can be converted into the company's stocks six months after issuance.

V. Redemption Rules

Convertible bonds have a mandatory redemption rule. According to the regulations, when the closing price of the stock is higher than 1.3 times the conversion price of the convertible bond for 15 out of 30 consecutive trading days, the company has the right to redeem the convertible bonds and pay the corresponding interest to investors.

How to Operate After Winning a Convertible Bond Lottery

Generally speaking, the day after we apply, we can check our lottery results through the securities firm's APP.

After successfully winning the lottery, we need to complete the payment before 16:00 on the same day.

The face value of a convertible bond is 100 yuan. If we win 10 bonds, we need to pay 1,000 yuan. Of course, we only need to ensure that there is enough available funds in the account, and the system will automatically complete the payment.After completing the payment, we will need to wait quietly for the convertible bond to be listed. Generally speaking, it takes about a month for a convertible bond to be listed and tradable.

Once the convertible bond is listed, we can sell it independently through the secondary market. Of course, we can also wait for six months and then choose to convert the convertible bond into shares.

Convertible Bond Risks

Investors who have been exposed to convertible bond investments will pay attention to a key indicator when subscribing for convertible bonds, called the premium rate. When investing in convertible bonds, it is advisable to choose those with a low premium rate.

The formula for calculating the premium rate of a convertible bond is:

Premium Rate = Convertible Bond Price / Conversion Value - 1

And the formula for calculating the conversion value of a convertible bond is:

Conversion Value = Par Value of Convertible Bond / Conversion Price * Stock Price

As a bond, when a convertible bond is first listed, its par value is 100 yuan. If the conversion value at this time is 90 yuan, then the premium rate of the convertible bond can be determined to be 11.1%.

At this point, it is equivalent to us spending 100 yuan to purchase a product worth 90 yuan.Conversely, when the value of a convertible bond is less than its conversion value, the premium rate of the convertible bond will become negative, which is equivalent to purchasing at a discount, thus creating a certain arbitrage space.

Generally speaking, the higher the premium rate of a convertible bond, the greater the probability of it breaking issue after listing, and the more difficult it is to keep up with the price trend of the underlying stock.