Optionable Stock

Optionable Stocks: What They Are and How They Work

Key takeaways
* An optionable stock has exchange-listed options available to trade.
* Exchanges set minimum criteria — price, public float, shareholder count, and trading volume — before listing options.
* Almost 6,000 companies and several hundred ETFs currently have listed options.
* Stocks without listed options are harder to hedge; investors may need OTC contracts arranged through a broker-dealer.

What is an optionable stock?
An optionable stock is a publicly traded equity for which standardized options contracts are listed on an options exchange. Those options give buyers the right (but not the obligation) to buy or sell the underlying shares at a set price before a specified expiration date.

Why optionability matters
Listed options provide tools for hedging, income generation (selling covered calls), and directional or leveraged exposure without buying the underlying shares. If a stock is not optionable, investors have fewer standardized hedging tools and may have to rely on negotiated over-the-counter (OTC) options, which are less liquid and can carry higher counterparty risk.

How to check whether a stock is optionable
Most exchanges publish lists of securities with listed options. A quick way to check is to search the exchange’s options listings (for example, the Cboe Options Exchange) or look up the stock’s derivatives on brokerage platforms that show available options chains.

Requirements for a stock to be optionable
Options exchanges require issuers to meet minimum standards before listing options. Typical criteria include:
* Exchange listing: The underlying security must trade on a recognized exchange (e.g., NYSE, Nasdaq, AMEX) — not exclusively OTC markets or pink sheets.
* Minimum closing price: The share price must meet a minimum for a majority of trading days in the prior three months (currently $3.00 per share for certain “covered” securities and $7.50 for others).
* Public float: At least 7,000,000 shares must be owned by persons other than insiders required to report under Section 16(a) of the Securities Exchange Act.
* Shareholder base: The company must have a minimum number of unique shareholders (commonly at least 2,000).
* Trading volume: Average aggregate trading volume across all markets for the preceding 12 months must meet a minimum (commonly about 2,400,000 shares).

Notes and timing
* Because of the price-and-history requirements, a newly public company typically must wait at least three months after its IPO before options can be listed.
* If a company fails to meet any one of the listing criteria, exchanges generally will not list options on its stock.

Conclusion
Optionable stocks expand the ways investors can trade and manage risk through standardized, exchange-traded options. Whether a stock is optionable depends on liquidity, public float, shareholder base, and price history — criteria designed to ensure sufficient market depth and efficient option markets.