Which Stocks Have Options?

Option Trading Topic: Which Stocks Become Optionable? Why do only some stocks have options?

Dear Options Trading FAQ:

While searching Investor's Business Daily for options and leaps on various stocks, I wondered what it takes for a certain stock to be "optionable" and then what volume it would take for it to be listed in the various newspapers that list option prices?

It is very confusing, since DRI (Darden Restaurants, Inc.), which spun off from GIS (General Mills), has options even though it is a relatively "new" company, but NSCP (Netscape) does not appear to be a stock which has options, even though it is very volatile. Can you shed some light on this? I want my stock options.

Curiously yours, Need More Options

Dear Can't Get Enough...Options, that is!:

This is an interesting question that many ask but no one seems to know the exact answer. The rules are set by each exchange but are usually similar.

Here are the requirements for the Chicago Board of Options Exchange (CBOE):

Listing Requirements:
1) Minimum of 7 million shares out that are owned by folks not required to report their holdings.
2) Minimum of 2,000 shareholders
3) Full compliance of security laws (SEC1933, etc)
4) Trading volume of 2.4 million shares in the preceding 12 months
5) Market price of at least 7 1/2 in the three previous months.

Exchanges definitely respond to public demand. If you have a stock that meets the requirements, give the option product department a call!

As for which options get listed in the financial papers, I guess that is set by the papers. Long time readers will know how poor I think the news coverage is for option prices. Many folks enter orders based on prices in the paper which in no way reflect reality. Because last sales (and not bids) are listed, the quotes do not take into account when the option last traded. Inactive options may be bid at a price far away from the last print. Always ask for bid-ask quotes before placing an options order. This also has the additional benefit of forcing the order clerk to double check that he is entering the right order for you.

Other tips in dealing with order clerks will be featured in an upcoming issue.

Good luck and trade well! Remember, an educated options trader is the best options trader. Browse these books books on trading options.

Tags: Options Trading, Options Exchange, Options Order

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