Co-Portfolio Managers David O’Donohue and Jason Hill discuss how convertible arbitrage strategies can potentially capitalize from increased market volatility through gamma trading.
Video recorded 1/27/16.
The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice. This material is distributed for informational purposes only. The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the information mentioned, and while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The views and strategies described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
Alternative investments may not be suitable for all investors. Alternative investing strategies, such as gamma trading, are not appropriate for all investors. The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security’s investment value. Convertible Arbitrage Principal Risks: Convertible Securities Risk-The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security’s investment value. Convertible Hedging Risk- If the market price of the underlying common stock increases above the conversion price on a convertible security, the price of the convertible security will increase. The portfolio’s increased liability on any outstanding short position would, in whole or in part, reduce this gain. Short Sale Risk: A portfolio may incur a loss (without limit) as a result of a short sale if the market value of the borrowed security increases between the date of the short sale and the date the portfolio replaces the security. The portfolio may be unable to repurchase the borrowed security at a particular time or at an acceptable price.
© 2016 Calamos Investments LLC. All Rights Reserved. Calamos® and Calamos Investments® are registered trademarks of Calamos Investments LLC.