Discount
When an asset trades below its stated, par or intrinsic value.
A discount is an asset trading below its par or intrinsic value.
A discount is when an asset trades below its par or intrinsic value, meaning you can buy it for less than it is notionally worth. Discounts appear on bonds, funds and some structured products. For traders it is the opposite of a premium and signals a specific market view.
How It Works
- It is the reverse of a premium
- It can signal value or risk, depending on context
- Bonds and funds commonly trade at discounts
Trading Tips
Ask why it is at a discount before assuming it is cheap
Compare it to the premium side of the same asset
Read the reason before the price
Discount Example
Say a bond fund with $100 of assets per share trades at $92 after forced selling. Buyers get the full portfolio at an 8% discount, pocketing the gap if it normalizes. Discounts pay patience. Premiums charge for it.
How Traders Use Discount
Buy discounts with a catalyst, not just cheapness: discounts persist where something is wrong. Check why it trades below value first. Value traps wear discount stickers too.
Related Terms
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