Conversion Premium

Conversion Premium - a conversion premium is the percentage or exact dollar amount by which the price of the convertible security exceeds the current market value of the common stock into which it be converted into.. The convertible security is a bond, a debenture or a preferred stock, that can be converted by a shareholder, using the option Claus, into a common stock, by the corporation. The conversion premium is the percentage amount or dollar amount of the converted stock that exceeds the current market value. The term option is the right (not a demand) to buy or sell a portion of a select stock. It is an underlying Claus that allows the holder to exercise his option.