How to Trade Savings Bonds

Once you have purchased a savings bond from the U.S. Treasury Department, you are free to trade it on the secondary market, such as an independent broker or financial institution. Knowing how to properly follow the procedures, as well as how to shop around for the best value, can help you yield the biggest profit.

Instructions

Difficulty: Moderate

Things You’ll Need:

• U.S. savings bonds

1. Learn the difference between a primary market, where securities such as savings bonds are originally purchased, and the secondary market, where bonds are usually sold. This is important to know, since the U.S. Treasury Department, the most common primary market for U.S. savings bonds, does not charge a fee or make any profit from a sale to the secondary market.
2. Use a proper secondary market broker-dealer to trade your savings bonds by contacting the investment firm or financial institution of your choice. Brokers buy and sell stocks and bonds on the over-the-counter (OTC) market, locating buyers by using indexes from various stock exchanges such as NASDAQ and NASD.
3. Choose which type of sell order you want, which will dictate how your broker will trade your savings bonds. Select a limit order if you choose to only sell your bonds at a certain price or higher, and decline all other offers automatically.
4. Choose an all-or-none (AON) order to trade bonds that must be offered as a total package. These bonds cannot be split up or negotiated in any way.
5. Stipulate an all-or-kill order (AOK), which requires your broker to sell the bonds within a specific time period, or cancel the order altogether and the subsequent trade.
6. Pick a trading style that suits your needs. A regular-way trade stipulates that the cash transaction must occur within 3 business days of the agreement. You can also delay the transaction for up to 60 days in order to accumulate additional interest before the sale of the bond, or choose not to complete the trade at all.

Tips & Warnings

• Make sure that you keep track of any accrued interest that may occur during the trade process, especially if you have opted not to sell your stock in a regular-way trade. Sometimes, if you wait a little longer, you can make more money on your trade because of interest accrual and wise trade strategies.