June 2, 2019

Trading Options on Initial Public Offerings

Initial Public Offerings (IPO’s) always create a buzz in the markets. Investors, financial news networks, etc. love to report on these. It’s like welcoming a new baby to the family. Just in the last month, look at the coverage that UBER (Ticker: UBER) and Beyond Meat (Ticker: BYND) have garnered. A common question we get from our students is “can we trade options on these IPO’s?” The short answer is no, not yet.

The rules differ slightly from exchange to exchange but Nasdaq is pretty much the standard. Here is their criteria:

To have options on their stock traded on options exchanges, companies must meet the following criteria.

  1. The company must have a mimimum of 7,000,000 publicly held shares outstanding.
  2. The stock must be listed on the NYSE, Nasdaq, AMEX or any national stock exchange..
  3. For the past 5 trading days, the closing price of the stock must have a minimum per share price for a majority of trading days. This means that IPO issues cannot have options traded on them until 5 days after the initial public offering date.
  4. There must be at least 2,000 shareholders in the company.

Follow me on Twitter @MikeShorrCBOT

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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