In the financial world, when a security is “called away,” the holder is compelled to sell it by the actions of another party. This usually happens when a party chooses to exercise a contract obliging the person who holds the security to sell it. Generally, when securities are called away, the sale is a disadvantage to the person holding them, and there's an advantage for the person buying and taking possession.
There are several ways a security may be called away. One of the most common occurs when an option is exercised. When people buy, sell, and trade options, they sell agreements to sell or buy a product at a given price. Options gamble on the future price of securities, with people hoping the price will rise or fall, depending on the type of option they buy. When an option is called away, the person who holds the option compels a person to sell or buy the security at the price listed in the option. Usually, the price is not as favorable as that on the open market.
Another situation can arise with bonds, where the issuer may decide to redeem the bond before maturity. Likewise, a person holding a short position in a security can be obligated to deliver, and the security will be called away. In all of these situations, the person holding the security loses out when forced to sell it and may miss a chance for more interest earnings or the possibility of selling the security independently for a better price.
The risk that investments will be called away is one people have to take when they enter contracts surrounding the sale and trade of investments. People weigh their knowledge of the market and a given security to determine whether the contract is favorable and to estimate the chances of having the security called away and being forced to sell the security, potentially under circumstances that may result in a loss. Investors cannot always estimate with a high degree of accuracy and this is one reason investments are typically diversified.
People who fail to honor contracts can be subject to legal penalties. They will usually be compelled to honor the contract and can also be fined for the breach, in addition to being subject to civil suit. The financial industry is very strict about enforcing contracts, as much of the industry relies on contracts, and if this system breaks down, it can cause chaos in the financial markets.
