What requirements must a company meet for options to be traded on its stock?

By Investopedia Staff AAA
A:

Companies must meet four criteria before options on their stock can be traded on options exchanges:

  1. The underlying equity security must be listed on the NYSE, AMEX or Nasdaq.
  2. The closing price must have a minimum per share price for a majority of trading days during the three prior calendar months.
  3. The company must have at least 7,000,000 publicly held shares.
  4. The company must have at least 2,000 shareholders.

If a company does not meet any one of these criteria, options exchanges such as the Chicago Board Options Exchange will not allow any options to be traded on the underlying security. Additionally, because of the second condition listed above, a company cannot have options traded on it until at least three months after its initial public offering date.

(To learn more about options, check out the Options Basics Tutorial.)

RELATED FAQS

  1. How is a penny stock created?

    Understand how penny stocks are issued and regulated, and learn how these sometimes rewarding but always risky investments ...
  2. In an IPO, who is a greensheet distributed to and for what purpose?

    One of the most talked about documents that arises in the process of introducing a new issue is the greensheet. This is an ...
  3. Why do share prices fall after a company has a secondary offering?

    The best way to answer this question is to provide a simple illustration of what happens when a company increases the number ...
  4. What is a company's worth, and who determines its stock price?

    A company's worth - its total value - is its market capitalization, and it is represented by the company's stock price. Market ...
RELATED TERMS
  1. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
  2. Short Put

    A type of strategy regarding a put option, which is a contract ...
  3. Wingspread

    To maximize potential returns for certain levels of risk (while ...
  4. Volatility Smile

    A u-shaped pattern that develops when an option’s implied volatility ...
  5. Nadex

    Nadex stands for the North American Derivatives Exchange, a regulated ...
  6. Exchange-Traded Binary Options

    Exchange-traded binary options, regulated by the CFTC, let you ...
Related Articles
  1. Stock Safety: Top 3 Ways to Limit Your ...
    Options & Futures

    Stock Safety: Top 3 Ways to Limit Your ...

  2. Applying Binary Options To Equity Markets
    Options & Futures

    Applying Binary Options To Equity Markets

  3. Can You Buy Stock Insurace? 3 Strategies ...
    Options & Futures

    Can You Buy Stock Insurace? 3 Strategies ...

  4. ETF Options Hedge Risk of ETF Trades
    Mutual Funds & ETFs

    ETF Options Hedge Risk of ETF Trades

  5. What is Alibaba?
    Investing News

    What is Alibaba?

Trading Center