Price-Based Option

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DEFINITION of 'Price-Based Option'

A derivative financial instrument in which the underlying asset is a debt security. Typically, these options give their holders the right to purchase or sell an underlying debt security (usually a bond) or to receive cash payment based on the current value of the underlying debt security.

INVESTOPEDIA EXPLAINS 'Price-Based Option'

This unique type of option has been traded in the past, but it is rarely traded in modern financial markets. The yield-based option is a more commonly-traded relative of the priced-based option.

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RELATED FAQS
  1. If a long call is owned on the record date of a stock, is the owner of the option ...

    The owner of a long call for a stock is entitled to a dividend only if the option is exercised prior to the ex-dividend date, ... Read Full Answer >>
  2. How can an investor profit from the cyclical nature of the electronics sector?

    An investor can profit from the cyclical nature of the electronics sector in two ways. He can employ sector rotation, shifting ... Read Full Answer >>
  3. What does negative vega mean for credit spreads?

    Greek vega measures an option's sensitivity with respect to a change in the underlying asset's volatility. The vega of an ... Read Full Answer >>
  4. What options strategies are best suited for investing in the banking sector?

    The covered call option strategy allows investors to profit from the banking sector's stability and its track record for ... Read Full Answer >>
  5. What options strategies are best suited for investing in the drugs sector?

    The covered call and long straddle options strategies enable investors to capitalize on the unique characteristics of the ... Read Full Answer >>
  6. What is the difference between compounding interest and simple interest?

    Interest is the cost of borrowing money, where the borrower pays a fee to the owner for using the owner's money. The interest ... Read Full Answer >>
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