In general context, a call option (or simply a call) is a feature embedded in an instrument, security, or product allowing the issuer to buy it back from the holders in accordance with certain terms and conditions. For example, a callable stock has an add-on in the form of an embedded call option that allows the issuer to buy it back from the holders as per the terms specified in the issue (including call price, callability period, etc). The issuer can exercise the embedded option during a set period of time, after which the right lapses.
Similarly, a callable bond is a bond that contains a provision giving the issuer the right to buy back (call) the bond at a predetermined price (call price) on a specified date or after a given period of time, prior to maturity date. The call price is usually above the par value. The issuer can take advantage of the call provision in the event of a decline in interest rates, which increases market prices beyond the call price. This provision places a cap on the bond price, and as such protects issuers from unfavorable market movements.
The call option, in the above sense, is an inseparable part of a host contract or product- i.e., the option cannot be traded separately as opposed to a tradable call option that constitutes a contract on a certain number of securities (e.g., 100 stocks) whereby the holder can exercise into buying the specified number of underlying securities at the set strike price (exercise price) up to, or at, a specified date (expiration date).
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