Hi Friends,
Good Afternoon...
Today's Word:
Foppery(n):
Syn:
1: foolish character or action : folly
2: the behavior or dress of a fop
E.g: There was certainly no harm in his travelling sixteen miles twice over on such an errand; but there was an air of foppery and nonsense in it which she could not approve.
Term of the Day - Convertible hedge :
An arbitrage strategy which involves buying a convertible security while simultaneously selling short the same company'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 company. 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.
If the stock price rises, then the investor gains on the convertible stock, but loses (hopefully a smaller amount) on the short sale position.
If the stock price falls, the price of the convertible falls, but the value of the convertible will never fall below the value that an ordinary bond issued by the company would have. On the other hand, the investor makes a gain on the short position (hopefully more than the amount lost on the convertible).
A convertible hedge is considered a relatively safe strategy, but choosing which ones to pursue is complex and so convertible hedges are done primarily by professional investment managers who are supported by powerful analytical tools.
Joke:
Five-year-old girl was asked by her teacher
Teacher: what does your father does?
Girl: whatever my mom tells him to..
Teacher: !?!
Today's investing mantra
"There's no reason we should become fearful if a stock goes down. If a stock goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month." - Warren Buffett, 2008 Berkshire Hathaway shareholders meeting
Today's Quote:
"'I Love Photos' - Because the best thing about them is that, it never changes, 'Even when people in it do change.' " - Shakespeare
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Thanks & Regards,
Murali Sankar S
"A Good Plan of Today is better than Great Plan of tomorrow's."
