Most equity options are traded on options exchanges,
and many are multiply listed, or available on more than one exchange.
Further, options pricing and the terms of options contracts are
standardized so that they're
fungible,
or interchangeable. This means trading is quick and convenient,
since traders acting for investors can buy an option on one exchange
and sell it back on another.
Who decides?
The Securities
and Exchange Commission regulates the option selection
process, and beyond that, exchanges make independent decisions
about which options to list.
For equity options, a stock on which options are
offered must:
Have a minimum
of 2,000 shareholders and 7 million outstanding shares
Meet the SEC's
minimum average trading price during the previous 3 months
In addition to those minimum qualifications, stocks
are chosen based on the stock's volatility and volume of
trading, the company's history and management, and the perception
that there's investor demand for the option.
A company is not responsible for options on its
stock, though some exchanges require consent before listing the
option. It's possible for exchanges to decide to delist
options, or remove them from the trading market, if the underlying
stock no longer meets the listing criteria.
