33 lines
2.1 KiB
Plaintext
33 lines
2.1 KiB
Plaintext
32 Part I: Basic Properties ol Stock Options
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contracts. Smaller stocks have position limits of 60,000, 31,000, 22,500, or 13,500
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contracts. These limits can be expected to increase over time, if stocks' capital
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izations continue to increase. The exchange on which the option is listed makes
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available a list of the position limits on each of its optionable stocks. So, if one
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were long the limit of XYZ call options, he cannot at the same time be short any
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XYZ put options. Long calls and short puts are on the same side of the market;
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that is, both are bullish positions. Similarly, long puts and short calls are both on
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the bearish side of the market. While these position limits generally exceed by far
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any position that an individual investor normally attains, the limits apply to "relat
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ed" accounts. For instance, a money manager or investment advisor who is man
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aging many accounts cannot exceed the limit when all the accounts' positions are
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combined.
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8. The numher of contracts that can be exercised in a particular period of time ( usu
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ally 5 business days) is also limited to the same arrwunt as the position limit. This
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exercise limit prevents an investor or group from "cornering" a stock by repeat
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edly buying calls one day and exercising them the next, day after day. Option
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exchanges set exact limits, which are subject to change.
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ORDER ENTRY
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Order Information
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Of the various types of orders, each specifies:
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1. whether the transaction is a buy or sell,
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2. the option to be bought or sold,
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3. whether the trade is opening or closing a position,
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4. whether the transaction is a spread (discussed later), and
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5. the desired price.
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TYPES OF ORDERS
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Many types of orders are acceptable for trading options, but not all are acceptable on
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all exchanges that trade options. Since regulations change, information regarding
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which order is valid for a given exchange is best supplied by the broker to the cus
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tomer. The following orders are acceptable on all option exchanges:
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Market Order. This is a simple order to buy or sell the option at the best pos
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sible price as soon as the order gets to the exchange floor. |