Do All Stocks Trade With Options?
Not all stocks trade with options. Even when a stock trades with options, certain options on the stock will be more active than others. There are several ways of finding out if options are offered for a particular stock.
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Stocks and Options
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Stocks and options trade in separate markets. Even though an option represents a specific stock, it is, in fact, part of a separate options market. Fortunately, most stockbrokers offer options trading services as well, so it is relatively easy for stock market investors to trade options.
Finding Stocks With Options
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It is hard to known immediately whether or not options trade on a particular stock. While stocks representing large cap companies are more likely to trade with options, there is no guarantee that this is the case. The best way to find out if a stock trades with options is to look up the stock on a financial website that provides this kind of information. Alternatively, you may search for the option by visiting the Chicago Board Options Exchange website.
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The Option Chain
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The option chain lists available options by strike price. It lists calls and puts and gives daily price change information for each option. Some option chains also give volume and open interest numbers. The option chain is useful because it identifies the active option markets on a stock.
Exercise
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One option represents 100 shares of stock. When you buy an option, you may exercise the option to purchase 100 shares at the option's strike price. For example, if you buy a call option on XYZ with a strike price at $50 and XYZ stock rises to $55, you may exercise to option and buy 100 shares of XYZ at $50 a share. Alternatively, you may simply sell the option back at a profit without ever purchasing any XYZ stock.
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