# Optionable Stock: What It Is, How It Works, Requirements

## What Is Optionable Stock?

An optionable stock is one where the shares have the necessary [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) and volume such that an exchange lists that stock's options for trading. In order for a stock to be optionable, exchanges mandate that certain criteria be met, including a minimum share price, number of shares outstanding, and minimum unique shareholders, among others.

### Key Takeaways

*   An optionable stock is one that has listed options on it available to trade.
*   In order for a stock to be optionable, it must meet the minimum criteria established by exchanges.
*   Currently, there are almost 6,000 companies with optionable stocks, as well as several hundred more exchange-traded funds (ETFs) with listed options.
*   If a stock is not optionable, it is more difficult to hedge positions in that stock, which makes it harder to mitigate the risks involved.

## Understanding Optionable Stocks

An optionable stock is one that has [options](https://www.investopedia.com/terms/o/optionscontract.asp) listed and tradable on a market [exchange](https://www.investopedia.com/terms/e/exchange.asp). Not all companies that trade publicly on stock markets have exchange-traded options. This is due in part to certain minimum requirements that need to be met, such as a minimum share price and minimum amount of [outstanding shares](https://www.investopedia.com/terms/o/outstandingshares.asp).

Currently, there are almost 6,000 companies with optionable stocks, as well as several hundred more [exchange-traded funds (ETFs)](https://www.investopedia.com/terms/e/etf.asp) with listed options. A stock being optionable allows investors to purchase options on the underlying stock, giving them the right to buy or sell shares of that underlying stock at a set price.

If a stock is not optionable, it is more difficult to [hedge](https://www.investopedia.com/terms/h/hedge.asp) positions in that stock, which makes it harder to mitigate the risks involved. For stocks like these, an investor can arrange for an [over-the-counter (OTC) options contract](https://www.investopedia.com/terms/o/otcoptions.asp) to be written with their [broker-dealer](https://www.investopedia.com/terms/b/broker-dealer.asp).

It is quite easy these days to look up online if a stock has listed options on it or not. The easiest way to check whether a stock is optionable is to go to the [Cboe Options Exchange](https://www.investopedia.com/terms/c/cboe.asp) website and check whether there are options listed for a particular stock.

## Requirements for Stock to Be Optionable

In order to have options listed for a stock, it must meet certain criteria. Under current Cboe rules, there are five primary criteria that a company must meet before options on its stock can be traded on the options exchange:

1.  The underlying equity security must be listed on a recognized exchange such as the NYSE, AMEX, or Nasdaq. It cannot trade over the counter, such as on the [pink sheets](https://www.investopedia.com/terms/p/pinksheets.asp) or a bulletin board, like [over-the-counter-bulletin-board (OTCBB)](https://www.investopedia.com/terms/o/otcbb.asp).
2.  The closing price of the company's shares in the market must have a minimum per-share price for a majority of trading days during the three prior calendar months. The current minimum price is $3.00 per share for "[covered securities](https://www.investopedia.com/terms/c/coveredsecurity.asp)" or $7.50 per share for [non-covered securities](https://www.investopedia.com/terms/n/non-covered-security.asp).
3.  There must exist a minimum of 7,000,000 shares of the underlying security that are owned by persons other than those required to report their stock holdings under [Section 16(a)](https://www.investopedia.com/terms/s/section-16.asp) of the [Securities Exchange Act of 1934](https://www.investopedia.com/terms/s/seact1934.asp).
4.  The company must have at least 2,000 unique shareholders.
5.  The trading volume (in all markets in which the underlying security is traded) has been, on average, at least 2,400,000 shares in the preceding 12 months.

If a company does not meet any one of these criteria, options exchanges, like the Cboe, will not allow any options to be traded on the underlying security. Additionally, because of the second condition listed above, a company cannot have options traded on it until at least three months after its [initial public offering (IPO)](https://www.investopedia.com/terms/i/ipo.asp) date.  

> **Fast Fact**
>
> Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.

> **Article Sources**
>
> 1.  Barchart. "[Optionable Stocks by Sector](https://www.barchart.com/options/stocks-by-sector?orderBy=symbol&orderDir=asc)."
>     
> 2.  Cboe. "[Cboe Options Exchanges](https://www.cboe.com/us/options/)."
>     
> 3.  Cboe. "[Rules of Cboe Exchange, Inc.](https://cdn.cboe.com/resources/regulation/rule_book/C1_Exchange_Rule_Book.pdf)," Pages 90-91.