l****q
发帖数: 767 | 1 Dear all,
I have a question from work.
A bank manages our funds for investment. I receive the monthly investment
statement. Last year, the bank bought some reverse convertibles for us, and
we receive option premium each month, also we receive interest payment.
I searched online for "reverse convertible" and "option premium", but I am
still at loss about how this works. I thought the option premium and
interest payment should be the same for each month, but on March's statement
, both option prem | R*********4
发帖数: 27 | 2 Wow...may touch on hedge transaction...not an easy topic. Could book
everything as an interest income OR combination of interest income and other
comprehensive income.
The interest you received may be different month by month due to
amortization of bond premium or discount (eg. original issue discount,
accrued interest on purchase, etc). In additions, amortization methods (ie
straight-line method, interest method, etc) also contributes to the
frustration.
Option premium correlates to stock price | l****q
发帖数: 767 | 3 Thank you!
I tried to tie this to what I learned, straight-line method or interest
method. No clue though. As I said, the interest and option premium for the
first a few months are the same, and then I found the most recent int. and
option premium decreased.
Thanks for your suggestion about how to book them, which is helpful to
reconcile the statement and our analysis. But for now, I just separate them
to make myself not confused by the different types of income. | a****j
发帖数: 1277 | | l****q
发帖数: 767 | 5 今天鼓起勇气将我在这发的问题发给了银行的人, 上来报告一下。他说option premium
和int. payment相加就是得那个我说的数，最后一个人的数降低了，因为差几天才满一
个月。我又问他怎么确定option premium和int. payment的比例，他说underwriter定
的。不过我听到他说了stock's value涨了，option premium就高些，我想不刚刚才说
option premium每个月就那么算么？ face amt不变，coupon rate不变，monthly pmt
怎么变嘛？但是我不想再问了，因为他说话特别快，number出来一串串的，我在那儿叫
一个手忙脚乱啊，不停地说hold on one second，然后就在那儿算他说的那些数 - 本
来以为他回发个email给我解释，结果很突然的打了个电话， 而且可能因为天气很好，
此人心情颇靓，前面整个以聊天为主，oh my god,我心情如此紧张，结果结结巴巴不知
道前面说了些什么，心想怎么还不说我的问题啊。。。 | R*********4
发帖数: 27 | 6 Thanks for update...but I still don't get that. Probably I think too
complicated.
The option value usually is determined at the grant date when the option is
vested. Thus, when you received the sale proceed of option, it may involve
gain/loss (ie. selling price of option - cost of option). Convertible bond
with option, sometimes put option, MAY touch on hedge transaction. Depending
on what kind of hedge transaction (ie.operating or cash flow hedge),
convertible bond with option MAY touch on othe | l****q
发帖数: 767 | 7 Thanks! I can ask more experienced people or the auditors, so I would not worry about how to book it.
I think what the bank advisor said were conflicting some times.
He once explained Option Premium to me "you know, if you pay more than the
face amount of the bond, the extra payment is the premium". I think that's
bond premium, not option premium. Let's look at the definition for premium:
What Does Premium Mean?
1. The total cost of an option.
2. The difference between the higher price paid for |
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