What are stock orders?

Warehouse orders are derivative securities that are issued together with other shares or bonds. They give the buyer the right to buy shares in the future at a specified price. Stock orders, also called commands for the purchase of shares, are often issued in conjunction with preferred shares or bonds to make the purchase more attractive to investors. The investor who purchases a bond would also receive orders for a given number of shares at a particular price. This allows the company to potentially pay a lower bond interest rate than it would otherwise, as the investor also received the possibility to purchase ordinary shares later. This may be attractive to the investor because the order may allow him to buy this share at a price that can be lower than stocks at this point.

Warehouse orders are issued and guaranteed by the issuing company. They have a long life, with a date of expiry of up to 15 years in the future. Like shares, it is possible to trade behind the counter. American commands can be donet at any time before the expiration date. European commands must be applied to the expiration date

For example, XYZ Corp. It issues bonds with stock orders. Joe investor buys a bond in USD (USD) $ 10,000, which will pay him 10% interest, and receives 10 -year orders to purchase 100 XYZ ordinary shares for $ 10 per share. Company XYZ Corp. Common Stock is currently trading for $ 8 per share. Note that orders are always issued for more than the current stock price.

Two years later, Common Stock XYZ Corp. traded for $ 7 per share. Joe still gains 10% interest on her bond and still holds commands. Now the commands are not, because it is still above the market price.

Three years later, Common Stock XYZ Corp. traded for $ 15 per share. Joe can perform your orders and buy 100 XYZ shares for $ 10 per share. Can turn around and sell ordinary shares for $ 15for share and realize 50% profit. If, on the other hand, the market price of XYZ stocks never exceeds $ 10, Joe does not have to perform commands. After 10 years of orders simply expire.

Skill commands differ from call options, which are short -term options for security at a specified price. Call options are not issued by a company that issues shares. Usually expires within a few months.