SolvedCG55582 | Financial options: Stock exchange traditional options: traded options
From HM Revenue & Customs · Capital Gains Manual
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. |