What is an option class?
An option class includes all the call options or all the put options listed on a stock exchange for a particular underlying asset. For example, all of the calls available for trading in Apple Inc. (APPL) shares would be in the same option class. All puts would be part of another class. The number of options available to buy or sell in a given option class will depend on the size and trading volume of the underlying asset, as well as general market conditions.
Key points to remember
- An option class is the set of put or call options for a particular underlying asset. Puts are a class are different classes.
- An option class can be broken down into series, which correspond to all calls or sales of an underlying asset expiring in the same month.
- The size of the option class depends on the volume of the underlying asset and the market conditions of the underlying and the options market of the underlying.
Understanding an option class
Option classes are used to classify options on an exchange for investors. All major public market exchanges use option classes to list the options available for trading on a given underlying asset. Very often, exchanges and financial sites divide the class into series. A series of options is the whole call or put at various exercise prices and the same deadline for a given underlying asset.
For example, all calls or put options that expire in June would constitute a series of options. A series of options is part of the largest class of options. Therefore, when viewing the option quotes, some sites may display the entire option class, but very often it will be sorted by expiration date (series).
Other markets, such as over-the-counter (OTC) or institutional markets, do not always use option classes due to the complexity and personalized structuring of negotiated options.
As with stocks, options traded on the stock market must be traded through a broker who connects with market makers to facilitate trading. Option exchanges use standard bid-ask pricing models. Although option prices are generated from advanced analytics, their daily trading prices are still influenced by supply and demand in the market.
Brokers generally require a minimum of $ 2,000 in principal to approve an options trading account. The rules and regulations relating to option trading are supervised by the Clearing Corporation.
An options chain is all you need and calls options for a given underlying asset.
Generally, once access to an option trading platform is established, investors will be able to see the full list of option classes for their preferred underlying security. The options are generally listed and classified by the ticker on the underlying asset of the instrument.
A brokerage options trading platform will separate the calls and place underlying securities. Calls and put options are generally the two broadest option classes available. In each of these classes, investors will find a list of available strike prices and expirations.
The amount of information provided on each option class will generally be based on an investor’s subscription preferences. Some option quotes include advanced analytics such as Greek, while other platforms / subscriptions can only display the name of the basic contract, strike, expiration, supply, demand, last price, last date / time of transaction, percentage change, volume, open interest and often implied volatility is also included.
Real example of an option class
Some option classes are large, while others are relatively small depending on the popularity of the options market for a given underlying asset.
For example, all calls available for trade on the SPDR S&P 500 Trust (SPY) number in the hundreds.
In contrast, the options class of Barnes Group Inc. (B) was relatively small in June 2019, with several options available for trading with two expiration dates available. At the time, the security was trading at $ 54.46.
All of the above calls represent the put option class for this stock, while put options represent the put option class for this stock at the time of writing. Option classes may increase or decrease depending on whether more or less options become available due to increased or decreased interest.