Financial options: Stock exchange traditional options: traded options
Although traditional options and traded options are similar in concept there are a number of important differences.
|Traditional option||Traded option|
|No market in the options. Investors can only realise a profit by exercising the option and selling the shares.||The options can be bought and sold. Investors can realise a profit by selling the option itself.|
|Options are available for any listed stock.||Options are only available for the shares in a small number of large companies.|
|Options can be created for any number of underlying shares.||Options are only available in standard contracts normally for1,000 shares.|
|More flexibility over exercise and expiry date.||Only certain fixed expiry dates and a limited and fixed range of exercise prices are available|
|The option holder is entitled to any dividend declared during the option period if they buy the shares.||No entitlement to dividends declared during the option period.|