tarunajwani

When you're comparing bonds with the same maturity, coupon, and duration you may only look at OAS and then your reasoning of higher OAS = cheaper bond holds true.

If you are comparing bonds with different effective duration, for example, you will need to look at the difference between Z spread and OAS (=option cost).
For bonds with longer duration, an investor would demand a much higher OAS, on a relative basis, to compensate for higher risk. This is when you look at option cost.