What is a Conversion Premium?
A conversion premium is understood to be the percentage or dollar amount that the current price of a convertible security is more than the amount that would be realized by converting the security into common stock. Investors often check in on the current status of any convertible investments in the portfolio and determine if such a conversion would be in their best interests at a given point in time. Depending on the circumstances, the conversion premium may be quite healthy, making it wise for the investor to execute the conversion. At the same time, calculating the conversion premium may indicate that the time is not right to make such a conversion. Essentially, when the current market value of the common stock in question is at a price that is lower than the percentage amount currently associated with the convertible security, the investor is wise to do nothing. Choosing to engage in the action of converting stock from the convertible securities is considered to be a waste of time a
” A conversion premium is understood to be the percentage or dollar amount that the current price of a convertible security is more than the amount that would be realized by converting the security into common stock. Investors often check in on the current status of any convertible investments in the portfolio and determine if such a conversion would be in their best interests at a given point in time. Depending on the circumstances, the conversion premium may be quite healthy, making it wise for the investor to execute the conversion. . At the same time, calculating the conversion premium may indicate that the time is not right to make such a conversion.
