What is Put Option in a NCD?
A put option in NCD means that the investor has an option to surrender the NCD if he wants to, and get back his/her principal. The put option provides the investor with a lot of flexibility. If NCD interest rates go up, and the investor can get better rates from the market, he can exercise the put option and get back his/her principal which can be invested elsewhere.
What is Call Option in a NCD?
A call option in NCD means that the company has an option to ask the investor to surrender the NCD in exchange for the principal investment. A call option gives flexibility to the company. If NCD interest rates go down, and the company can get funds at lower rates from the market, it can exercise the call option to give the money back and can raise money from the market at lower rates.