Bond Option Definition

Bond Option is an option contract that underlying asset is a bond. Other as opposed to different characteristics of the underlying assets, there isn’t any significant difference involving stock and connection options. Just similar to other options, a bond option allows investors the opportunity to hedge the risk in their bond portfolios or speculate for the direction of connection prices with minimal risk. A buyer of a bond call option is expecting a new decline in rates of interest and an boost in bond rates. The buyer of any put bond option is expecting a rise in interest rates and also a decrease in connection prices.