Hi TE,
Yes, people sometimes "trade around" these positions, depending on whether the pricing gets out of line with historic norms.
However, the convertible hedger doesn't really want to have an opinion on the direction of the underlying security. He is only concerned (really) about generating an above average rate of return on his invested capital, ordinarily easily done (well, maybe not so "easy", considering the study necessary <G> ) by collecting interest income on both the long (the convert) and the short (short credit).
For very large accounts, such a strategy is very remunerative, though guys like you and I are in the trenches actually trying very hard to get the direction "right."
Its just another investment style, TE.
Have a good day. |
