Equity Options

Equity options give you exposure to the securities they are listed over. The value of an equity option varies according to movements in the value of the underlying shares.

Features

Underlying asset Equity options are available over many of the top 100 shares
Exercise style American
Settlement Physically settled. (Shares change hand on expiry) 
Expiry day The last Thursday of the month, unless otherwise specified by ASX.
Last trading day Trading will cease at 4.20pm on expiry Thursday. 
Premium Expressed in cents
Strike price Expressed in cents
Contract size Generally 100 shares pre contract
Contract value The exercise price of the option multiplied by 100

Equity option holders do not enjoy the rights due to shareholders - e.g., voting rights, dividends or franking credits. A call holder must exercise the option and take ownership of underlying shares to be eligible for these rights.

After the option's expiration date, the contract will cease to exist. At that point the owner of the option who does not exercise the contract has no "right" and the seller has no "obligations" as previously conveyed by the contract.

Benefits of equity options

  • Purchasing equity put options allows you to lock in a predetermined sale price for your shares. Providing protection from a market downturn
  • Writing calls against stock already held generates additional income over and above dividends.
  • Leverage - equity options provide leveraged profit opportunities. When the market rises (or falls), percentage gains (or losses) are greater than rises (or falls) in the shares.
  • Low trading costs - since the amount of capital outlaid in an option trade is usually much lower than that involved in a share transaction providing similar market exposure, brokerage costs are often lower in option trades. 

For more information on equity options, please refer to the ASX explanatory booklet Understanding Options Trading (PDF 1.2MB).