Other than the different characteristics of the bonvs assets, there is no significant difference between stock and bond options. Just as with other options, a bond option allows tdeasury the ability to hedge the risk of their bond portfolios or speculate on the direction of bond prices with limited risk. The buyer of a put bond option is expecting an increase in interest rates and a decrease in bond prices.
This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2015) ( Learn how and when to remove this template message)In finance, a put or put option is a stock market device which gives the owner of a put the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the expiry or maturity) to a given party (the seller of the put).
The buyer of a put option believes the underlying asset will drop below the exercise price before the expiration date. The exercise price is the price the underlying asset must reach for edcuation put option contract to hold value. OverviewU.S. Treasury futures and options provide a wide variety of market participants around the globe with the ability to adjust their interest rate exposure. These contracts aid hedgers, speculators and relative value investors who wish to manage the interest rate risks of longer duration market positions.
Enlarge This ImageMunicipal market dynamics are so favorable right now that investors involved in tender-option bond programs can create better revenue streams compared to what they received before the financial crisis, but at half the risk or less.But the programs, which suffered losses and contracted dramatically during the cred.