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Convergence trade is a trading strategy consisting of two positions: buying one asset forward—i.e., for delivery in future (going long the asset)—and selling a similar asset forward (going short the asset) for a higher price, in the expectation that by the time the assets must be delivered, the prices will have become closer to equal (will have converged), and thus one profits by the ...
This happens because new bonds are issued with higher interest payments, making them more attractive than existing bonds with lower payouts. The opposite tends to happen when interest rates decline.
If you sell the bond or bond fund ... the bid and ask prices from investors as well as recent trading prices for the security. A bond quote includes the name of the issuer, here Apple, as well as ...
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Use of the clean price also serves to differentiate interest income (based on the coupon rate) from trading profit and loss. It is market practice in US to quote bonds on a clean-price basis. When a bond settles the accrued interest is added to the value based on the clean price to reflect the full market value.
A long box-spread can be viewed as a long strangle at one pair of strike prices, and , plus a short strangle at the same pair of strike prices. The long strangle contains the two long (buy) options. The short strangle contains the two short (sell) options. A short box-spread can be treated similarly.
The most basic is physical selling short or short-selling, by which the short seller borrows an asset (often a security such as a share of stock or a bond) and quickly selling it. The short seller must later buy the same amount of the asset to return it to the lender.
Buy the bond: Once you buy the bond, its terms begin. The investment will grow at the specified interest rate. The investment will grow at the specified interest rate. Receive payment: The issuer ...