Canary option is a type of call or put option that secures the right of the holder or issuer to early redemption of a bond on predetermined dates related to changes in the coupon rate. Such options are typical for step-up and resetable issues.
A bond can have a single Canary option (for example, Zhuhai Huafa Group, 4.43% 4nov2029, CNY) or multiple options (for example, Hubei Science & Technology Investment Group, 3.55% 10mar2040, CNY). A Canary option has the features of both Bermuda and European options: on the one hand, the option exercise dates are discrete and predetermined, on the other hand, when the date of the last of the Canary option expires, the option can no longer be exercised until maturity, and the issue parameters remain unchanged.
If the Canary option was not exercised on the last possible date or was exercised to a portion of the issue amount, after that date it no longer affects the bond value and the security is traded as a step-up or plain vanilla since early redemption is no longer possible.