Can You Trade Preferred Stock: Definitive Guide

Can You Trade Preferred Stock: Definitive Guide

This guide answers the simple but important question: can you trade preferred stock? Early in the piece: yes — preferred stock is a tradable security in U.S. markets (and many global markets). In this article you will learn what preferred stock is, the venues and mechanics for trading it, the features that affect its liquidity and price, how retail and institutional trading differ, tax and settlement considerations, common strategies, and alternatives for gaining exposure. Practical steps and research sources are included so you can act with clarity and care.

Note on market context: as of 2026-01-21, according to Barchart, market participants face a condensed, event-filled trading week with potential volatility from a presidential policy address and a simultaneous GDP and Core PCE data release, events that can influence interest-rate expectations and therefore preferred stock pricing.

Overview of Preferred Stock

Preferred stock is a class of equity that sits between common stock and debt in a company's capital structure. It normally grants holders priority over common shareholders for dividend payments and in liquidation, but typically lacks the same voting rights as common stock. Preferreds often pay fixed or floating dividends and are issued with defined par values and terms (for example, $25 par for many exchange-listed U.S. preferreds or $1,000 par for many institutional tranches).

Because preferreds combine equity-like and bond-like traits, a central question investors ask is: can you trade preferred stock in the same way you trade common shares or bonds? The practical answer: yes — but the mechanics, liquidity, price drivers, and risks differ materially from common stock and corporate bonds.

Key Characteristics That Affect Tradability

Several features of preferred stock affect how and whether a given issue is actively tradable:

• Fixed vs. floating dividend: Fixed-rate preferreds pay a set dividend (e.g., 5.50% annually on par). Floating-rate preferreds track a reference rate plus a spread. Floating features can reduce interest-rate sensitivity and may affect liquidity.
• Cumulative vs. non-cumulative dividends: Cumulative preferreds accrue unpaid dividends; non-cumulative issues do not. Cumulative status matters for income reliability.
• Convertible preferreds: Some preferreds convert into common shares under set terms. Convertible features add equity upside and alter price behavior.
• Callable vs. non-callable: Many preferreds are callable after a call date. Callability creates reinvestment risk and cap on price appreciation near call date.
• Perpetual vs. term: Perpetual preferreds have no scheduled maturity, like many bank-issued issues; term preferreds have a stated redemption date. Perpetuals behave more like long-duration income securities.
• Credit/rating profile: The issuer’s creditworthiness strongly impacts preferred pricing. Lower-rated preferreds must offer higher yields but may trade less liquidly.

Each of these characteristics shapes how market makers price the security, how wide bid-ask spreads can be, and whether retail brokers will list the issue on an exchange screen.

Markets and Venues Where Preferreds Trade

The preferred market has two primary retail-facing segments and a large institutional OTC market:

• Exchange-listed $25-par preferreds: Many U.S. preferred issues intended for retail investors trade on primary exchanges (NYSE, NASDAQ). These typically have $25 par and display on most retail brokerage platforms. They are easier for individual investors to access.
• $1,000-par institutional and OTC market: A large portion of the preferred market — including bank, insurance, and corporate tranches — trades over-the-counter in $1,000 par lots, often between institutional desks. These issues can offer different yields and structures but are less accessible to retail investors.

Retail investors who ask “can you trade preferred stock” will most often interact with the $25-par exchange-listed issues. Institutional desks, alternative trading systems, and block markets handle larger, $1,000-par trades.

When planning to trade, identify whether the issue is exchange-listed or OTC, because the venue affects accessibility, transparency, and liquidity.

How Retail Investors Can Trade Preferred Stock

If you are asking “can you trade preferred stock” as a retail investor, here are the typical practical steps:

1. Open a brokerage account: Use a full-service or discount broker that lists exchange-traded preferreds. Many retail brokers provide quote pages for preferred issues. If you also manage digital assets, explore Bitget’s products for multi-asset needs and Bitget Wallet for custody of Web3 assets — but remember equities trading and crypto services differ by provider and regulation.

2. Find the ticker and issue details: Preferred tickers often have series suffixes (for example, large bank common ticker plus a letter series). Your broker’s screener or the issuer’s investor relations page can help. Always verify par value and trading venue.

3. Enter orders: You can place market or limit orders like with common stock. However, because preferreds frequently have lower volume and wider spreads, limit orders are strongly recommended to control execution price.

4. Monitor quotes and depth: Preferreds can show thin markets. Check bid-ask spreads, displayed size, and recent trade prints.

5. Settlement: Exchange-listed preferred trades generally follow standard equity settlement (trade date +2 business days), but check your broker’s confirmation.

Throughout, ask yourself: can you trade preferred stock cheaply and quickly? For many issues, the answer depends on liquidity and your order type; planning and limit orders reduce execution surprises.

Ticker Conventions and Identifying Issues

Preferred tickers commonly derive from the issuer’s common stock ticker plus a series letter (for example, ABC-A). Brokers may present series suffixes as full tickers. When identifying an issue:

• Confirm par value ($25 vs $1,000).
• Check the prospectus or term sheet for dividend calculation, cumulative status, call dates, and conversion terms.
• Use the SEC’s filing database or the issuer’s investor relations materials to verify official terms.

Order Types and Execution Considerations

• Market vs limit orders: For thinly traded preferreds, limit orders protect you from unfavorable fills. Market orders can execute at the displayed ask price, which may be far from the last trade.
• Wide bid-ask spreads: Expect wider spreads than common shares, especially for issues with limited dealer inventory.
• Partial fills: Low displayed size can lead to partial fills. Monitor execution reports.
• Institutional tools: Large block trades may use working orders, algorithms, or negotiated OTC execution; retail traders typically do not access these directly.

Liquidity, Market Microstructure and Pricing Drivers

Liquidity in preferreds varies widely. Many issues have low daily volume and wide spreads. Primary pricing drivers include:

• Interest rates: Preferreds are sensitive to rate moves; when interest rates rise, fixed-rate preferred prices typically fall.
• Issuer credit quality: Downgrades or credit stress can cause sharp price declines.
• Call schedules: A callable preferred often trades near or at yield-to-call pricing as the call date approaches.
• Macro fixed-income moves: Preferreds often move with broader bond market sentiment despite being equity instruments.
• Supply/demand and dealer inventories: Market-makers’ willingness to hold inventory affects tradeability.

Exchange-listed vs OTC Differences

Exchange-listed preferreds provide greater transparency — quotes, trade prints, and regulatory reporting are publicly visible. OTC institutional tranches can have deeper inventories and tailored terms, but price discovery is less transparent to retail investors. That asymmetry explains why many retail traders prefer exchange-listed $25-par issues.

Settlement, Par Value and Corporate Actions

• Settlement conventions: Most exchange-listed preferreds follow standard equity settlement (T+2), but always confirm with your broker.
• Par value implications: $25-par issues are common for retail exchange listings. $1,000 par issues are more common in institutional OTC markets.
• Call and redemption: If a preferred is called, holders typically receive the call price (often par plus a small premium). A call can truncate income expectations.
• Conversion: Convertibles swap preferreds for common stock under terms in the prospectus.
• Corporate actions: Splits, reverse splits, mergers, and reorganizations can affect preferred treatment; consult issuer notices for details.

Tax Treatment and Income Considerations

Tax rules vary by jurisdiction and by the nature of the dividend. In the U.S.:

• Qualified vs non‑qualified dividends: Some preferred dividends may qualify for the lower qualified dividend tax rate if holding-period and issuer rules are met; many preferred dividends, however, are treated as ordinary income. Confirm with a tax professional.
• Broker reporting: Brokers report dividend income and transaction proceeds on year-end tax documents.
• Tax on sale: Capital gains or losses on sale are subject to capital gains tax rules.

This is not tax advice. Consult a qualified tax advisor for your specific situation.

Risks of Trading Preferred Stock

Trading preferred stock carries several risks to consider:

• Interest-rate sensitivity: Fixed-rate preferreds can experience significant price volatility when rates change.
• Credit/default risk: Preferreds rank ahead of common stock but behind debt in bankruptcy.
• Call and reinvestment risk: A call at an inopportune time may force reinvestment at lower yields.
• Limited voting rights: Preferred holders rarely have standard common-stock voting power.
• Low liquidity and wide spreads: This raises execution cost and potential slippage.
• Dividend suspension: Issuers can suspend preferred dividends in stress scenarios, especially non-cumulative issues.

Being clear about these risks helps answer the practical part of “can you trade preferred stock” with realistic expectations.

Ways to Gain Exposure Without Individual Issues

If direct trading of individual preferred issues seems impractical, consider pooled vehicles:

• Preferred stock ETFs: Offer instant diversification across many preferreds; look at expense ratios, distribution policies, and duration profiles.
• Preferred mutual funds and closed-end funds: Active managers can select across the capital structure and use leverage (in closed-end funds), but fees and NAV discounts/premiums matter.

Pros: diversification, professional management, easier liquidity. Cons: fees, potential tracking differences, and for closed-end funds, market price can diverge from NAV.

Trading Strategies and Uses in Portfolios

Common ways investors use preferreds:

• Income generation: Preferreds are often used to boost yield in income-focused allocations.
• Laddering: Staggering preferreds with different call dates to manage reinvestment risk.
• Tactical yield plays: Investors may buy preferreds when spreads vs Treasuries or corporate bonds widen.

Always match strategy to risk tolerance and time horizon. Ask: can you trade preferred stock with a short-term horizon? Yes, but be mindful of spreads, call risk, and limited liquidity.

Short-term vs Long-term Approaches

• Short-term traders chase price moves; they must accept higher execution risk and be responsive to news and rate moves.
• Long-term holders focus on dividend income and call schedules; they may tolerate price volatility insofar as income meets expectations.

Due Diligence and Research Tools

Before trading, research these items:

• Prospectus/term sheet: Confirm dividend calculation, cumulative status, call provisions, conversion terms, and par value.
• Issuer credit ratings and financials: Rating agencies and issuer filings help gauge credit risk.
• Historical liquidity and spreads: Use broker screens and trade history to assess expected execution costs.
• Market indexes and screeners: Preferred-focused indexes track performance and yield trends.
• Regulatory filings: Use official filings for definitive terms.

Primary sources include issuer filings on the SEC database, broker research pages, S&P and industry reports, and specialist preferred-screeners.

Institutional Considerations and Market Access

Institutional traders operate in a different segment of the preferred market. Key points:

• $1,000 par OTC market: Institutions often transact via broker-dealers or ATSs for larger blocks.
• Block trading and negotiation: Institutions use negotiated fills and sometimes principal risk from dealers.
• Custody and prime-broker arrangements: Institutions rely on custody providers and prime brokers for clearing and settlement.

Retail access to these institutional tranches is limited; retail investors asking “can you trade preferred stock” should check par value and venue to ensure accessibility.

Regulatory, Listing and Accounting Notes

• Listing requirements: Exchange-listed preferreds must meet exchange rules for listing, disclosure, and reporting.
• Accounting treatment: Preferred equity is reported on the issuer’s balance sheet as equity, subject to classification rules depending on terms (e.g., mandatorily redeemable features may be treated differently).
• Investor protections: Preferreds carry issuer-specific covenants and disclosure obligations; always consult the prospectus for investor rights.

Frequently Asked Questions

Q: Can I buy preferred stock in a standard brokerage account? A: Yes — exchange-listed $25-par preferreds can be bought in most standard brokerage accounts, subject to your broker’s listing and margin rules.

Q: Are preferred dividends guaranteed? A: No. Preferred dividends are contractual but can be suspended by the issuer; cumulative issues accrue unpaid dividends while non-cumulative do not.

Q: Can preferred stock be called? A: Many preferreds are callable after a specified call date. Call features are common and affect valuation and yield-to-call calculations.

Q: How liquid are preferreds? A: Liquidity varies widely. Some exchange-listed issues trade regularly; many have modest daily volume and wide spreads.

Q: Are preferred dividends taxed like ordinary income? A: Tax treatment depends on the dividend type and your jurisdiction. Some dividends may qualify for favorable tax rates but often they are taxed as ordinary income. Consult a tax advisor.

Example Tickers and Common Issuers (Illustrative)

Banks, utilities, REITs, and insurance companies commonly issue preferred stock. Exchange-listed preferreds often carry the issuer’s ticker plus a series letter. Always perform due diligence and do not trade based solely on examples.

If you trade digital-asset products alongside equities, consider using Bitget for crypto access and Bitget Wallet for Web3 custody. For pure equities and preferreds, a regulated brokerage that lists exchange-traded preferreds is required.

Practical Checklist: Before You Trade Preferred Stock

• Confirm the issue’s par value and listing venue.
• Read the prospectus for dividend terms, cumulative status, call/convertible provisions.
• Check issuer credit ratings and recent financials.
• Review recent trade prints, volume, and bid-ask spread.
• Decide order type (limit recommended) and size relative to displayed liquidity.
• Understand tax treatment and consult a tax professional if needed.

How Macro Events Can Affect Preferreds

Macro events that shift interest-rate expectations or credit sentiment affect preferred prices. For example, as of 2026-01-21, according to Barchart, a compressed trading week with a presidential policy address and a simultaneous GDP revision and Core PCE release created conditions for elevated volatility. Events that increase rate uncertainty or change inflation expectations tend to move preferred yields and prices because preferreds exhibit bond-like sensitivity to rates. Monitoring major economic releases and central bank signals is therefore prudent when trading preferreds.

Practical Example: A Retail Trade Walkthrough

1. Research: Identify an exchange-listed preferred with adequate daily volume and a known dividend yield.
2. Verify terms: Confirm cumulative status and call date in the prospectus.
3. Place order: Use a limit order sized within typical displayed volume to reduce market impact.
4. Monitor: Watch for news on the issuer or macro moves that could widen spreads.
5. Settlement and record-keeping: Confirm trade settlement on your broker’s reports and track dividend payments for tax reporting.

This process answers the hands-on aspect of “can you trade preferred stock” for individual investors.

Common Trading Mistakes to Avoid

• Using market orders in thinly traded preferreds.
• Ignoring call schedules that cap upside potential.
• Treating preferreds like high-grade bonds without checking issuer credit risk.
• Overlooking the difference between exchange-listed $25-par and OTC $1,000-par issues.

When to Use Funds Instead of Individual Issues

Consider funds when:

• You want instant diversification across many preferreds.
• You prefer professional management to handle credit selection.
• You need daily liquidity and do not want to manage individual issues.

Consider individual issues when you want control over specific credit exposure, call features, or tax lot management.

Monitoring and Ongoing Management

• Regularly review issuer creditworthiness and call schedules.
• Reassess position sizing if market conditions cause spreads to widen.
• Keep tax and record-keeping information organized for year-end reporting.

References and Further Reading

As you research, consult primary and reputable secondary sources such as:

• Investopedia: Preferred stock primer and how it works.
• Fidelity and Charles Schwab educational pages on preferred stock.
• S&P Global research on the U.S. preferred market.
• Dividend-focused research and preferred-specific screeners.
• SEC filings (prospectuses, 10-K/8-K) for issue-level terms.
• Industry newsletters and market commentary for macro context.

As of 2026-01-21, according to Barchart, market participants faced concentrated market-moving events that can impact rate-sensitive securities like preferreds; use such updates to inform timing and risk assessment.

Further research and due diligence on each issue is essential. For multi-asset traders who also manage digital assets, explore Bitget products and Bitget Wallet for secure crypto custody and trading while using a regulated broker for equities. Always consult a tax professional for personalized tax treatment and a licensed advisor for portfolio-level investment decisions.

More Practical Help

If you want to start exploring preferreds, take these first steps:

• Use your broker’s preferred screener to filter by par value, dividend type, and yield.
• Run a small test trade with a limit order to evaluate execution and spreads.
• Compare results against a preferred ETF to decide whether individual issues or a fund better meets your needs.

Explore Bitget’s educational materials and wallet solutions if you also manage cryptocurrency exposures and seek a cohesive multi-asset toolkit.

Further exploration will make the answer to “can you trade preferred stock” practically actionable for your objectives.