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 do you trade put options on E*TRADE?

    Learn all about put option trading at E*TRADE. Explore margin accounts and become familiar with the different types of option ...
  2. How do you trade put options on Ameritrade?

    Learn about option trading with TD Ameritrade. Explore the different types of options and their possible impacts on the investors ...
  3. What is the difference between a short position and a short sale?

    Learn how short selling and short positioning are different, specifically in regards to the nature of the commodity being ...
  4. Why would I need to know how many outstanding shares the shareholders have?

    Find out why shareholders should know how many outstanding shares have been issued by a corporation, and learn what happens ...
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 ...

You May Also Like

Related Articles
  1. Options & Futures

    A Detailed Look Into China's Options ...

  2. Options & Futures

    Options -- Accessing Stakes In Apple ...

  3. Options & Futures

    Trading Using Binary Options

  4. Options & Futures

    These Are The Top Brokerage Firms For ...

  5. Options & Futures

    Apple As An Example Of How a Protective ...

Trading Center