Floorless Preferred Stock/Debenture Message Board

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Strategies & Market Trends : Floorless Preferred Stock/Debenture

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To: Zeev Hed who wrote (449)	6/12/1999 4:53:00 PM
From: Mama Bear	Read Replies (2) of 1438

Zeev, I believe that the margin requirements are very similar to buying such a stock long, IOW 100% of equity. So realistically one would need some cash on hand in case the price moved against them. However, I believe a floorless bandit will make an arrangement with their broker and use the debenture as collateral. This in effect makes their position a short against the box. The broker knows that the convert holder can deliver shares to close the short, and therefore doesn't worry too much about margin requirements. Of course I could be wrong about this, as I've reached these conclusions through deduction, not by actual experience. Barb

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