What is an Option Class
Option class is the set of all the call options or all the put options for a particular stock, index fund, or futures security on a listed exchange. The number of options available for purchase or sale within a given option class will depend on the size and trading volume of the underlying company or index, as well as overall market conditions.
BREAKING DOWN Option Class
Option classes are used to categorize investment options on an exchange for investors. All major public market indexes use option classes to list the instruments available to investors for trading. Other markets for options may include over the counter markets or institutional markets which generally do not use option classes because of the complexity and customized structuring of the options traded.
Option Class Investing
All of the major option exchanges will include option class listings for investors. Leading public option exchanges include the AMEX, NYSE Arca Options, BATS, BOX, Chicago Board Options Exchange, Nasdaq GEMX and Nasdaq PHLX. Most exchange-traded options are plain vanilla options on stocks, bonds, interest rates or indexes.
Just like with stocks, exchange traded options must be traded through a broker who connects with a market maker to facilitate trading. Option exchanges also use standard bid-ask pricing models. While option prices are generated from advanced analytics, their daily trading prices are still influenced by supply and demand in the market.
Depending on the brokerage firm used, option investors may have varying access to option class listings. Most discount brokerage platforms will require separate option trading applications for investors that segregate option trading platforms from other platforms used. Broker dealers will also generally require a minimum of $2,000 in investments for approval of an option trading account because of the margin levels involved. Rules and regulations for options trading are overseen by the Option Clearing Corporation.
Generally, once access to an option trading platform is established investors will be able to view the full listing of option classes for their preferred underlying security. Options are usually listed and classified by the ticker on the instrument’s underlying asset. An options brokerage trading platform will segregate calls and puts on underlying securities. Calls and puts are usually the two broadest option classes available. Within each of these classes investors will find a list of available strike prices and expirations.
The amount of information provided on each option class will typically be based on an investor’s subscription preferences. Using available option class information an option class can be studied as a gauge of investor sentiment.