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.)

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