Convertible Hedge investors? Message Board

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Strategies & Market Trends : Convertible Hedge investors?

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To: Scott Mc who wrote (26)	8/6/1997 11:02:00 PM
From: Lorne Larson	of 107

Scott Have a look at Eldorado Gold. Stock is at about $4.20. They have an 8.25% convertible (OTC) that presently trades at no premium to the stock, and is presently at around $95-$100. Can't see the bond dropping too much more - should hit its investment value at around $90. Game plan is to go long bond/short stock at about a 2/1 ratio. If stock goes up I'll immediately make money because the bond is at no premium to the stock. If the stock goes down the bond won't drop very far - might even make money on the short side when the bond hits its investment value. This one is almost too easy - bet there's going to a lot of hedge funds playing this. Look for the short interest on Eldorado to take a big jump. Only danger is if gold craters completely and the bonds crater as well. Unlikely to happen because Eldorado is a solid company - lots of cash in the bank. Regards

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