CG55512 | Traded options: definition

TCGA92/S144 (8)

Section 144 (8)(b) defines a `traded option’ as an option which, at the time of its abandonment or other disposal, is listed on a recognised stock exchange or a recognised futures exchange.

See CG50275 for the definition of recognised stock exchange, and CG56120 for a list of recognised futures exchange.

A traded option is precisely what its name implies. It is an option which is intended to be bought and sold in a traded options market. Investors and speculators hope to make a return by dealing in the options rather than the underlying assets.

You are likely to see traded options which are dealt in on the London International Financial Futures and Options Exchange (LIFFE). LIFFE is now part of the NYSE Euronext grouping following its takeover by Euronext and Euronext’s merger with the New York Stock Exchange in April 2007.

The limited general overview in this manual is based upon the practices and procedures of LIFFE. However, traded options markets operated by other recognised stock exchanges and futures exchanges are likely to be run on similar lines, though subject to the rules of the particular market.