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Explained: All about call and put options in bonds

Investors should always consider the yield that they will get, assuming that the company will exercise the ‘call’ option

February 26, 2020 / 09:01 AM IST
Explained: All about call and put options in bonds

Non-convertible debentures (NCDs) come with a fixed tenure. But you can exit them mid-way. The issuing company too can buy back its NCDs from you and return your principal. When a firm allows you to exit your NCD investment or buys it back before maturity, the call and put options come into play. Given their higher coupon rates relative to deposits, these instruments have many takers, despite the relatively higher risks involved in such investments. What is a ‘call’ or...

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