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Morning Commentary: Heavy trading volume in secondary; Tesla convertibles dominate
By Abigail W. Adams
Portland, Me., Jan. 14 – The convertibles secondary market opened Tuesday with massive trading volume with more than $370 million on the tape less than one hour into the session.
With equity markets setting records as the completion of the phase I trade deal with China approaches, market players were setting up volatility trades, a market source said.
There was decent buy volume in low premium, high dollar names, the source said.
However, one name pushed the early morning volume to record highs – Tesla Inc.
Tesla’s convertible bonds “were all over the place,” as stock again shot higher, a market source said.
They were responsible for almost one third of the total trading volume on the tape.
The bonds were flat to slightly expanded on a dollar-neutral basis. They were all starting to trade “at crazy prices,” the source said.
Tesla’s 2% convertible notes due 2024 rose to 185.875 early in the session. The bonds will switch into different hands as they approach double par, the source said.
Tesla’s 1.25% convertible notes due 2021 rose to 157.75. The 2.375% convertible notes due 2022 were changing hands at 176.5.
Tesla stock continued its massive run on Tuesday.
Stock traded as high as $547.41 shortly after the opening bell after ripping past $500 for the first time on Monday.
Stock was changing hands at $538.88, an increase of 2.67%, shortly before 11 a.m. ET.
“A lot of people are making a lot of money off of Tesla,” a market source said.
Twitter Inc.’s 0.25% convertible notes due 2024 also saw decent trading volume early in the session.
The 0.25% notes rose about 0.375 point dollar-neutral, a market source said.
The notes were changing hands at 98.125. Stock was $32.825, an increase of 0.41%, shortly before 11 a.m. ET.
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