What is equity premium?

How to tell if a stock has a premium?

In the stock and securities trading industry, premium is a concept with a very broad scope.

Generally speaking, when a property is sold on the market for more than its own effective corporate valuation or investment property, there is a premium to these bids.

There is a sentiment premium on strong leading stocks in the stock market.

When a specific sector encounters good news and rises sharply, the stock in the sector that has a larger rise or is the first to reach the daily limit will be the leading stock in the sector.

Investors in the market like to buy leading stocks at a premium.

When stock A’s phased increase reaches 15% and the average increase of all sectors reaches 8%, the 7% gap between the two is the premium given by the market to stock A.

Under normal circumstances, the premium of leading stocks will continue to be reflected in the period of sector fluctuations and adjustments.

When the entire sector declines, some leading stocks may rise instead of falling. This kind of counter-trend rise also reflects a premium.

Therefore, short-term speculators in the stock market usually believe in the principle of "if you want to do it, be the leading stock at a premium".

Some stock funds have staged premiums.

When the intraday company valuation of an ETF is 1.50, but its selling price on the trading platform is 1.52, the price difference of 0.02 is the fund premium.

In the process of investing, we sometimes find that a certain fund has a premium.

The main reason for the premium of stock funds is more complicated, but in the final analysis it is because investors in the market like it.

When investors in the market like a certain fund, they are more willing to pay a higher price than its current valuation to buy the fund.

The reason why investors do this is likely to be that among the constituent stocks of this fund, there is a stock that has the potential to continue to rise by the daily limit.

Some stock-related derivatives will have a premium.

During hot market trends, convertible bonds often command large premiums.

This kind of premium often deviates greatly from the stock price corresponding to the convertible bond.

To a certain extent, this type of premium is purely the result of gambling in hot sectors.

Generally speaking, the premium situation in the stock and securities markets often has a complex trading environment.

When we see the premium situation, we need to think about the underlying reasons every day.