Your spouse might have a "leaving coffee cups on the counter or table" trigger. Leave a half-drunk cup of coffee in the living room and it will trigger some adverse action on her part.
Bonds have a similar dynamic going on. Certain events trigger certain actions. This situation usually comes up with callable bonds. The term refers to a bond that gives the issuer an option to call them in, meaning they can buy the bond back under certain pre-set conditions. These pre-set conditions can include a rate trigger: an interest rate level that, when reached, causes the issuer to call the bond.
A company issues 10-year bonds at a rate of 7%. After two years, overall rates drop. Now, the company could issue 10-year bonds and only pay 5%. So it calls the original set and issues a new one at 5%. The drop in rates triggered the call. Rate trigger.
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Finance: What Does "Called Away" Mean?10 Views
finance a la shmoop what does called away mean? ....Okay Boeing the bomb maker was [Boeing plane dropping bombs]
trading at 127 bucks a share you thought it was getting pricey now at
25 times earnings well at $135 a share you'd sell it but here at 127 it was right on
the ledge in no-man's land unclear in your brain whether or not to [Girl thinking about stocks]
sell so you sold a covered call on it that is you sold another investor the
right to buy your Boeing shares any time in the next three months for $135 a
share that's what they pay you and that investor paid you two bucks a share for
that privilege so in essence you have a "forward sold" share of BA
at 137 not 135 right did you collect the two bucks there and you're feeling
pretty proud of yourself for coming up with this clever way to gently either [Girl feeling smug]
get out of the stock or make a free two bucks a share if the stock well never
went up that much but oh how the cold cruel street works...
A month later Santa tells the press that North Korea is being naughty and it
needs not socks or rocks but bombs dropped on it and a huge order for big [Bomb explodes]
fat noisemakers comes in to Boeing while the stock rockets overnight so to speak
From 129 to 152 a share, wow!
so what happens now well the other investor who paid two bucks a share for
the call option from you to buy your share at 135 well, they're dancing in
the street they're feeling pretty smart she paid two bucks for what is now a
gain of 152 minus 135 or $17 a share and yeah you read that right she just
made eight and a half times her money in a month good work if you can get it and
what happens to you well your shares of Boeing were called away yes took us a
while to get there to the definition thing they were called away by her thank
you very much then we're so far out of the money the other investor just called [Investor shouts and stock goes towards investor]
them right away paying you your two bucks and you just getting the hundred
and thirty-five bucks a share in cash there and that's it goodbye you lost all
the upside because your shares were called
away and meanwhile you watch the shares waft slowly upward over the next year [Boeing share value rising]
from 152 a share to 200 and you weep at the gains lost we also used the term
call away to refer to calling a bond early right like if you bought some
bonds from Boeing that gave them the right to call them before the bonds [Bond appears]
reached maturity and they do this all the time people well there's nothing you
can do those bonds will have been called away by Boeing so to be fair they do pay
you a little premium there usually for the privileged calling away yeah so not
necessarily the best thing for you but don't lose your cool and get mad because
when you sure don't want to end up on Santa's naughty list this year [Santa's reindeer fires laser at city]
we've heard Boeing's work wonders on Rudolph..
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