Why You Can’t Trade Options on Every Stock (Yet) – Schaeffers Research (blog)

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There are four primary criteria that determine whether you can trade options on a specific stock

Once you’ve discovered the nearly-endless utility and flexibility of calls and puts, it may come as a shock when you realize that you can’t trade options on every single stock that crosses your radar. The exchanges have established some minimum standards that must be met before options are listed on a specific equity. Here, per the Options Industry Council (OIC), are the four criteria:

  1. The stock must be listed on an established national exchange, such as the NYSE, NASDAQ, or AMEX. In other words, over-the-counter issues need not apply.
  2. A minimum closing stock price of at least $3.00 per share must be maintained for the majority of at least five trading days. This requirement takes a lot of super-speculative penny stocks out of the running.
  3. The stock’s float (the number of shares available for public trading) must be equal to or greater than 7 million shares. Any stock held by directors or major stakeholders isn’t included when calculating float.
  4. The equity must have at least 2,000 shareholders.

In order to make sure that #2 above is met, options generally aren’t listed until at least five days after a stock’s IPO. This is true of even the most popular stock launches. Back in May 2012, there was a lag of seven trading days before calls and puts were listed on Facebook Inc (NASDAQ:FB), while Twitter Inc (NYSE:TWTR) speculators also had to wait seven long sessions in November 2013 before they could trade options.