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. What does the underlying of a derivative refer to?

    Find out more about derivative securities, what an underlying asset is and what the underlying assets refer to in stock options ...
  2. What kinds of derivatives are types of contingent claims?

    Read about contingent claim derivatives, such as options contracts, whereby the payout of the transaction is dependent on ...
  3. What does it mean to take delivery of a derivative contract?

    Find out more about derivative contracts and what it means when the holders of derivative contracts take delivery of the ...
  4. Why is Manchester United (MANU) carrying so much debt?

    Learn how the Glazer family incurred substantial debt for its takeover of Manchester United, and understand how that debt ...
RELATED TERMS
  1. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
  2. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
  3. Open Trade Equity (OTE)

    Open trade equity (OTE) is the equity in an open futures contract.
  4. Multibank Holding Company

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

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

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

You May Also Like

Related Articles
  1. Entrepreneurship

    Should I Have An IPO on My Business

  2. Fundamental Analysis

    Why Investment Bank IPO Valuations Go ...

  3. Stock Analysis

    Adjusting Price Charts To Secondary ...

  4. Investing

    How To Track Upcoming IPOs

  5. Options & Futures

    Why Is Best Buy Stock So Volatile?

Trading Center