Convertible Preferred Stock
Preferred stock convertible into common shares, blending dividend income with equity conversion potential.
What is Convertible Preferred Stock?
Convertible preferred stock offers fixed dividends with the option to convert into common stock at a set ratio, providing downside protection and upside participation. In Strategy’s case, STRK exemplifies this, with 8% dividends and conversion at $1,000 strike, raising $744 million by March 2025.
It embeds call options, sensitive to volatility, with Strategy using it to minimize common dilution while funding Bitcoin.
Related Terms
Funding Rate
A periodic fee exchanged between long and short traders to balance market positions.
Cross Margin
Margin shared across all positions in a trader’s account to cover losses.
Thick Market/Thin Market
A thick market has many participants trading high volumes, ensuring robust information aggregation; a thin market has few participants and low volumes, risking inaccurate predictions.
Skin in the Game (Prediction Market)
The financial or reputational stake participants commit to in a prediction market, aligning their actions with true beliefs.
Slippage (order book)
The difference between the expected price of a trade and the actual executed price due to market movement.
Testnet
A blockchain network used for testing and development, simulating the main Ethereum network without using real digital assets.