What it is:
How it works (Example):
A price-based option gives the holder the right, but not the obligation, to purchase or sell (depending on whether the option is a call or a put) the underlying bond for a specific price (the strike price) on or before the option's expiration date.
For example, let's say you purchase a price-based option on bonds of Intel (INTC) with a strike price of $1,010 and an expiration date of April 16th. This option would give you the right to purchase an Intel bond at a price of $1,010 on or before April 16th (the right to do this, of course, will only be valuable if Intel the bonds are trading above $1,010 per share at that point in time).