A put option on a bond, also known as a put provision, gives🌼 the holder the right to demand the issuer pay back the principal before the bond matures, for whatever reason.

There are several reasons why a bond holder might exercise a put provision on a bond. The holder might feel the issuer's business and finances are weakening, thus jeopardizing its 澳洲幸运5官方开奖结果体彩网:ability to pay off debt. Interest rates may have risen since the bond was initially purchased, and the investor wants to recover principal🍌 to redeploy cash to investments that can e𒁃arn a higher return.

Another benefit to a bond with a put provision is it removes the pricing risk holders face when they attempt to sell the bond in the 澳洲幸运5官方开奖结果体彩网:secondary market, where they may be forced to sell 澳洲幸运5官方开奖结果体彩网:at a discount. The provision adds an extra layer of security for bond holders, as it gives them a safe 澳洲幸运5官方开奖结果体彩网:exit strategy. Because the put provision is favorable to bond holders, the bond will be sold 澳洲幸运5官方开奖结果体彩网:at a premium compared with bonds lacking the option.

Bonds with a put option are referred to as 澳洲幸运5官方开奖结果体彩网:put bonds or putable bonds. This is the opposite of a 澳洲幸运5官方开奖结果体彩网:callable bond, in which the issuer may redeem an outstanding bond before it reaches maturity. Terms and details of putable and callable bonds are discussed in the bond's 澳洲幸运5官方开奖结果体彩网:indenture.