Globus Bond Option (DBC) is for Legacy ’Trust’
DEFINITION of Bond Option:
A bond option is 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. Just as with other options, a bond option allows investors the ability to hedge the risk of their portfolios or speculate on the direction of bond prices with limited risk.
Bond Call Option
A bond option is a contract that gives an investor or issuer the right to buy or sell a bond by a particular date for a predetermined price. The Globus Bond Option, purchaser will purchase 21 call option contracts. The option period is for 20 years. Contract 1 will be the covered call used to purchase the bond at the rate of 1 to 1. Contract 2-21 will be option contracts relating to the bond interest. The value of each contract will start at 0 and will be based on the bonds increase in value at the rate of 12.5% per year compounded until exercised. The contracts will be valued and become exercisable on the following schedule:
At Globus we have a fiduciary relationship in which one party, known as an option buyer, gives another party, the option seller, a contract to hold assets for the benefit of, and the option beneficiary.
Derivatives are established to provide legal protection and insurance for the purchaser’s assets, to make sure those assets grow and are distributed according to the option contract, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes.