Call Premium

What is 'Call Premium'

Call premium is the dollar amount over the par value of a callable fixed-income debt security that is given to holders when the security is called by the issuer.

2. The amount the purchaser of a call option must pay to the writer.

BREAKING DOWN 'Call Premium'

1. The call premium is somewhat of a penalty paid by the issuer to the bondholders for the early redemption.

2. In order to receive the rights associated with a call option, the premium must be paid to the seller.

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RELATED FAQS
  1. How are call options priced?

    Learn how aspects of an underlying security such as stock price and potential for fluctuations in that price, affect the ... Read Answer >>
  2. Why doesn't the price of a callable bond exceed its call price when interest rates ...

    A callable bond provides the issuer (borrowing entity) with an option to redeem the bond before its original maturity date. ... Read Answer >>
  3. Why do companies issue callable bonds?

    Learn how callable bonds work, how they include an embedded call option, and understand the additional risks that callable ... Read Answer >>
  4. Under what circumstances might an issuer redeem a callable bond?

    Understand why an interest rate drop usually compels bond issuers to redeem callable bonds and re-issue them at the new, ... Read Answer >>
  5. How is a short call used in a covered call option strategy?

    Learn how short calls are used in a covered call option strategy, what the risks and rewards of this strategy are, and how ... Read Answer >>
  6. What is the difference between a covered call and a regular call?

    Learn what a call option is, what two strategies call options can be used for, and the difference between a covered call ... Read Answer >>
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