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. Why is a premium usually paid on a callable bond?

    Understand the nature and characteristics of callable bonds, and specifically why those factors lead issuers to offer a premium ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. What does it mean to be long or short a derivative?

    Find out more about derivative securities and what it indicates when traders or investors establish a long or short position ... Read Answer >>
  5. 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 >>
  6. A corporate bond I own has just been called by the issuer. How can a company legally ...

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