Definition
Bond option
A bond option is similar to a stock option with the difference that the underlying asset is a bond.
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Bond Option
An option contract in which the underlying asset is a bond. Other than the different characteristics of the underlying assets, there is no significant difference between stock and bond options.
Bond Options:
One tick in the bond options market is 1/64 of a point and has a value of $15.625. With September bonds futures at 107-29, for example, the September bond call option struck at 108 may be trading at 1-38 or 102 ticks equal to $1,593.75.
[edit] Valuing bond options
Black-Scholes cannot be applied directly to bond securities because of pull-to-par.
I used to work on a bond option desk where we lost £15m over about 6 months (nice work if you can get it ) on large directional trades, I remember being very impressed though with a guy on another desk who traded FX, ...
Exception: GNMA options and T-Bill, T-Note, and T-Bond options, in which the aggregate exercise price is the strike price times the face value of the underlying contract.
Risk Management: An issuer could offset the short position in the Bond Option (q.v.) by buying a corresponding Receiver Swaption on a Swap with the same coupon as the Bond.
Others choose to vary investments somewhat, including stock and bond options along with commodity futures in their investment strategies.
Getting to know six major currency pairs would seem an easy task when compared to the tens of thousands of stock and bond options available for analysis.
Also called the exercise price , these levels are set at regular intervals. For example, if Treasury bond futures were at 79-00, T-bond option strike prices would be at 74, 76, 78, 80, 82, and 84. ...
Any financial instrument who's price is based on or derived from the price of another financial instrument. Options can be categorized by the type of instrument they are based on - Equity Derivatives, Bond Options, and Interest Rate Derivatives.
The aggregate exercise price is $5000 ($50 x 100). Exception: GNMA options and T-Bill, T-Note, and T-Bond options, in which the aggregate exercise price is the strike price times the face value of the underlying contract.
Options do not have to be sold based on actual commodities. If you would rather sell options based on stocks or bonds, that is also possible. In fact, there are usually rather large markets built around stock and bond options.
30-year bond options, IBM options, DELL options). Points Predominately a forex term used to describe digits added to or subtracted from the fourth decimal place in a quoted currency rate, i.e. 0.0001. Pool See Commodity Pool.
 See also: Option, Bond, Options, Market, Future
  
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