Basics

A stock option is a contract that gives the owner the right, but not the obligation, to buy or sell a particular stock at a fixed price (the strike price) for a specific period of time (the expiration date). The contract also obligates the seller or writer to meet the terms of delivery if the contract right is exercised by the owner. To learn more about stock options view OIC's "What is an Option?" page or consider taking the Options Basics online class.

A call is an option contract that gives the owner the right to buy the underlying stock at a specified price (its strike price) for a certain, fixed period of time (until its expiration). For example, an American-style XYZ Corp. July 60 call entitles the buyer to purchase 100 shares of XYZ Corp. common stock at $60 per share at any time prior to the option's expiration date in July. For a call option writer, or seller, the contract represents an obligation to sell the underlying stock if the option is assigned. To learn more view OIC's "What is an Option?" overview page or consider taking the Options Basics online class.

A put is an option contract that gives the owner the right to sell the underlying stock at a specified price (its strike price) for a certain, fixed period of time (until its expiration). For example, an XYZ Corp. July 60 put entitles the owner to sell 100 shares of XYZ Corp. common stock at $60 per share at any time prior to the option's expiration date in July. For the writer, or seller, of a put option, the contract represents an obligation to buy the underlying stock from the option owner if the option is assigned. To learn more view OIC's "What is an Option?" overview page or consider taking the Options Basics online class.

An American-style option may be exercised at any time prior to its expiration. A European-style option may be exercised only during a specified period before the option expires. Currently, every European-style option is exercisable only on its expiration date.

Currently, all exchange-traded equity options are American-style. Most index options are European-style. I would check each index product that you are interested on trading to verify, among other things, the options exercise style.

Please visit the OCC's Series and Trading Data for a list of options that are currently available.

LEAPS® or Long-term Equity AnticiPation Securities are options, both calls and puts, with expirations as far out as two and one-half years. Conventional options will typically offer contracts with expirations up to nine months in the future. Currently, equity LEAPS® will have two series at any time with January expirations. For example, in August 2002, LEAPS® for a particular stock might be available with expirations of January 2004 and January 2005. Since equity LEAPS® expire only in January of these years, these LEAPS® will have different options "root symbols" to distinguish one year from another.

For an explanation of LEAPS® cycles, visit our LEAPS® FAQ. Visit LEAPS® Conversions for a comprehensive list of current LEAPS® symbols.

For information on various strategies using these versatile instruments, visit our Introduction to LEAPS®.

Talk with potential sales people at several firms. Ask each sale representative about his or her investment experience, professional background, and education.

Investors can find out about the disciplinary history of any brokerage firm and sales representative by calling 1-800-289-9999, a toll free BrokerCheck Hotline operated by the Financial Industry Regulatory Authority (FINRA). Investors can also check the background of a broker online via FINRA BrokerCheck.  FINRA will provide information on disciplinary actions taken by securities regulators and criminal authorities. State securities regulators also can tell you if a sales representative is licensed to do business in your state.

You will want to understand how the sales representative is paid; ask for a copy of the firm's commission schedule. Firms might pay sales staff based on the amount of money invested by a customer and the number of transactions done in customer's account. More compensation may be paid to a sales representative for selling a firm's own investment products. Ask what fees or charges you will be required to pay when opening, maintaining, and closing your account.

Determine whether you need the services of a full service or a discount brokerage firm. A full service firm typically provides executions services, recommendations, investment advice, and research support. A discount broker generally provides execution services and does not make recommendations regarding which securities you should buy or sell. The charges you pay may differ depending on what services are provided by the firm.

In the financial markets, an exchange refers to a securities exchange where stocks, options and/or futures contracts are traded by members of the exchange or their own accounts and the accounts of their customers. These exchanges are registered with and regulated by the Securities and Exchange Commission (SEC). The eleven U.S. exchanges that list and trade equity, ETF and index options contracts are:

• BATS Options Exchange (BATS)
• BOX Options Exchange (BOX)
• C2 Options Exchange (C2)
• Chicago Board Options Exchange (CBOE)
• International Securities Exchange (ISE)
• MIAX Options Exchange (MIAX)
• NASDAQ OMX BX Options (NOBO)
• NASDAQ OMX PHLX (PHLX)
• NASDAQ Options Market (NOM)
• NYSE Amex Options(NYSE Amex)
• NYSE Arca Options (NYSE Arca)

Absolutely. The Investor Services department is a one-stop comprehensive options resource center that provides information and supports all products traded on all OCC Participant Exchanges.

By calling 1-888-OPTIONS (1-888-678-4667) or by emailing options@theocc.com, representatives will answer questions and process requests for educational materials and seminar registrations Monday - Friday, 7:30 a.m. - 5:00 p.m. CT.

While not soliciting securities or providing investment advice, Investor Services assists investors with all of their options-related questions.

Known as The Characteristics and Risks of Standardized Options, this booklet has been written to meet the requirements of an SEC rule that requires the U.S. options markets to prepare, and brokerage firms to distribute, a booklet that briefly and generally describes the characteristics of options and the risks to investors of maintaining positions in options. Prior to buying or selling an option, investors must read a copy of this disclosure document. It explains the characteristics and risks of exchange traded options. You may view an online copy of this document in PDF format, or order a free brochure by contacting an Investor Services representative at 1-888-OPTIONS (1-888-678-4667), Monday - Friday, 7:30 a.m. - 5:00 p.m. CT.

The Options Industry Council (OIC) currently offers several seminars for Investors.  These seminars range from introductory concepts through advanced strategies. 

A complete list of seminar dates and locations are available on our Seminars page. Register online or contact Investor Services for more information at 1-888-OPTIONS for more information.

The price at which the owner of an option can purchase (call) or sell (put) the underlying stock. Used interchangeably with striking price, strike, or exercise price.

The “last trade” price may not represent a trade that has occurred within the current trading session. Trade prices posted as the last trade may have occurred several hours, days or weeks ago. That "last" may be misleading because many options do not trade every minute. Therefore, you will want to take a closer look at the option's current quoted bid and ask price. The current bid and ask prices are a better indication of the option's current market price than the last trade, and may offer a more accurate market valuation of any particular option.