Call option on preferred stock. Preferred stock can be issued with an embedded call option. Corporations can invoke this option to force shareholders to sell their shares back to the company for a preset price. Corporations like embedding call options in their preferred shares because it gives them the ability to retire shares when interest rates fall.

Call option on preferred stock

WHAT IS A Redeemable Preferred Stock?

Call option on preferred stock. Corporations embed the call option in preferred stock to give themselves a flexible response to changing financial or economic conditions. Preferred stock, like bonds, is sensitive to interest rate changes. If rates fall, the shares gain value as investors bid up prices to capture the relatively high dividend. Corporations can call.

Call option on preferred stock

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