An option (here a call option) that allows the holder of a callable bond (which is also a convertible bond) to convert the bond (a high-yield bond) to a non-callable bond of similar features (maturity, interest rate, etc.) in the event that the original bond is called by the issuer. This is a kind of protective guarantee (set out in a provision) that safeguards the rights of bondholders against an unfavorable action that might be taken by the issuing firm (effecting an earlier call). Under specific circumstances, an issuer can resort to an earlier call such as when the trading price of an underlying stock (to which the bond is convertible) reaches or exceeds a certain percentage of the exercise price during a specific trading period. For example, an issuer may effect an earlier call when the trading price stands at 150% of the exercise price over the span of one month.

On the other hand, a bondholder may have a conditional put option, i.e., the right to oblige the issuer to pay back the principal of the bond before maturity date.