Call premium

Similar financial terms

Call feature on bonds
A call feature grants the issue the right to retire the debt, fully or partially, before the scheduled maturity date. Inclusion of a call feature benefits bond issuers by allowing them to replace an old bond issue with a lower-interest cost issue if interest rates in the market fall.

Call risk on bonds
Many bonds include a call feature that allows the issuer to redeem or “call” all or part of the issue before the maturity date. The issuer usually retains this right in order to have flexibility to refinance the bond in the future if the market interest rate drops below the coupon rate. This implies three risks from the investor: (a) The cash flow pattern becomes uncertain, (b) The investor becomes exposed to reinvestment risk because the issuer will call the bond when interest rates drop, and ( ...

Hard call protection
Hard call protection usually refers to callable bonds. The protection is the period of time when the bond cannot be called, no matter what the interest rate is. That is, if the interest rate falls sharply, most callable bonds will be called (so the bond issuer can reissue at a lower interest rate). Hard call protection ensures that the holder of the bond can benefit when rates fall.

Call
An option giving the owner of a call the right to buy 100 shares of stock at a specified price by a specified deadline.

Covered calls
A call option that is sold when the seller also owns 100 shares of the underlying stock.

Yield to call
The percentage rate of a bond or note, if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price.

Uncovered call
A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price.

Put-call parity relationship
The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C=S+P-PV(k).

Provisional call feature
A feature in a convertible issue that allows the issuer to call the issue during the non-call period if the price of the stock reaches a certain level.

Margin call
A demand for additional funds because of adverse price movement. Maintenance margin requirement, security deposit maintenance

Call an option
To exercise a call option.

Call date
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond for a specified call price.

Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance margin loans to investors. The broker charges the investor the call money rate plus a service charge.

Call option
An option contract that gives its holder the right (but not the obligation) to purchase a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.

Call price
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a specified call date.

Call protection
A feature of some callable bonds that establishes an initial period when the bonds may not be called.

Call provision
An embedded option granting a bond issuer the right to buy back all or part of the issue prior to maturity.

Call risk
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.

Call swaption
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The writer therefore becomes the fixed-rate receiver/floating rate payer.

Callable
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to call the security.

Covered call
A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

Covered call writing strategy
A strategy that involves writing a call option on securities that the investor owns in his or her portfolio. See covered or hedge option strategies.

Cold-calling
Calling potential new customers in the hope of selling stocks, bonds or other financial products and receiving commissions.

Great call
Used in the context of general equities. Customer does not have a working order in with the trader, but we feel has an interest in participating in a trade being constructed due to one's past inquiry or activity.

Equitize a Margin Call
An event whereby a previously unsatisfied margin call is eliminated by an effective transfer of ownership. In 1998, Long Term Capital Management transfered a portion of ownership to its creditors. In some respects, it was a debt for equity swap.

Call auction
In a call auction participants indicate their willingness to buy or sell units of a security by placing an order to buy or sell some number of units at their buying or selling price. At some point in time the orders collected so far are matched together to form contracts. Different auctions follow different rules about the acceptance of orders, feedback about orders in the system, rules for updating or withdrawing orders, when to do the match, how to do the match, and the form and content of ...

Liquidity premium
The amount that forward interest rates exceed expected future spot interest rates.

Time premium
Also called time value, the amount by which the option price exceeds its intrinsic value. The value of an option beyond its current exercise value representing the optionholder's control until expiration, the risk of the underlying asset, and the riskless return.

Term premiums
Excess of the yields to maturity on long-term bonds over those of short-term bonds.

Tender offer premium
The premium offered above the current market price in a tender offer.

Single-premium deferred annuity
An insurance policy bought by the sponsor of a pension plan for a single premium. In return, the insurance company agrees to make lifelong payments to the employee (the policyholder) when that employee retires.

Risk premium approach
The most common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.

Risk premium
The reward for holding the risky market portfolio rather than the risk-free asset. The spread between Treasury and non-Treasury bonds of comparable maturity.

Premium bond
A bond that is selling for more than its par value.

Premium
(a) Amount paid for a bond above the par value. (b) The price of an option contract; also, in futures trading, the amount the futures price exceeds the price of the spot commodity.

Option premium
The option price.

Conversion premium
The percentage by which the conversion price in a convertible security exceeds the prevailing common stock price at the time the convertible security is issued.

Premium income
The income made by an insurance company resulting from premiums paid for insurance products.