Topic Archives: Trade Ideas

04-02-13 AIMC trade idea

The AIMC 2.75% converts were recently offered at 120 vs. 27.22 at Jefferies. This is a very small issue at $85m so 4m is the most I want to own. I like the profile of this balanced convert, which has a 2.3% current yield and 21% premium and five years until the put date. Using […]

03-24-13 EXXI trade idea

EXXI trade analysis I like the EXXI position for the arb book. EXXI convertible preferred was offered at 303.24 vs. 28.32 on March 22. We currently own 6,700 pref shares (1.67m in bond terms) on a 64 stock only delta and short 152 June 29 strike calls for an effective delta of 74. Using assumptions […]

03-07-13 ZINC trade idea

Trade idea Arbitrage: ZINC Horsehead HoldingĀ  (ZINC) is the largest producer of zinc products in the US and the largest recycler of EAF dust in North America. It is an integrated producer using recycled zinc feedstock and low-cost recycled electric arc furnace (EAF) dust to produce its zinc products. The company diversified into nickel recycling […]

02-07-13 WNC trade idea

Trade idea Arbitrage: WNC Wabash (WNC) is a manufacturer of truck trailers for the North American market. The company reports in three segments: 1) Commercial trailer products (71% of sales), 2) Diversified products (26%) and 3) Retail (7%). Convert Analysis WNC 3.375% converts are offered at 116.25 vs. 9.66. Using 500 credit, implied vol. is […]

01-15-13 SGY trade idea

Stone Energy (SGY) trade idea The SGY 1.75% convertible bonds due 3/1/17 trade at 89.75 vs. $20.81. Using 500 credit, the converts imply 31 vol., which is cheap to 100 day realized vol. of 41 and options implied vol. in the mid 40s. The 500 credit spread assumption is based on the trading levels of […]

11-19-12 CSGS trade idea

We are looking to re-initiate a position in CSG Systems (CSGS) 3% convertible bonds offered at 104.5 vs. $17.84. The issue is $150m with 4.6 years to maturity. Using a 400 credit spread, I get implied vol. of 27 and delta of 49. The stock has historically realized about 30 vol. over the past few […]

10-03-12 EXH trade idea

Trade Idea: Exterran Holdings (EXH) $355m 4.25% converts due 6/15/14 trade at 107.75 vs. 18 for 3.9% current yield and 38.6% premium. Using 500 credit spread, the implied vol. is 38 and delta is 55. This seems cheap given the historical realized vol. of over 50. The credit also has potential for tightening as we […]

07-25-12 CSGS trade idea

CSG Systems (CSGS) CSGS 3% convertible bonds are offered at 101 vs. 17.15 (JP Morgan). The issue is $150m with 4.6 years to maturity. Using a 500 credit spread, I get implied vol. of 27 and delta of 49. The stock has historically realized about 30 vol over the past few years if you take […]

07-09-12 CNQR trade idea

Trade idea CNQR 07-09-12 CNQR has 2.5% convertible bonds due 4/15/15 ($288m) trading at 140.375 vs. 66.28. Using 300 credit spread, the model implies 34 vol and 77 delta. The convert trades at 10.9% premium pct and 13.8 points. With a 2.5% coupon and 2.77 years remaining (7 points), this seems attractive and cheap vol […]

07-06-12 RHP trade idea

Trade idea: Gaylord Entertainment (GET) I like the GET 3.75% convertible bond that is trading at 150.375 vs. 38.87. Using 600 spread, the converts imply 29.5 vol., 88 delta and trade at 7.73 points of premium. This is a very low premium for a convert with 3.75% coupon with 2.24 yrs remaining. I calculate the […]