It stands for convertible bond option; an option that gives the holder of a convertible bond for shares of common stock during the life the bond. A convertible bond option and a callable asset swap (CAS) from a convertible bond asset swap (CBAS).

When the convertible bond option is exercised, the underlying bond ceases to exist. The option has a strike price which helps determine the best time to exercise. If the market price (of the underlying shares) exceeds the strike price, exercsie will become favorable. Otherwise, the holder may prefer to keep the convertible bond alive until better circumstanes come up.

This option is known for short as CBO.