What Is an Option Class?

What Is an Option Class?

Let me explain what an option class is: it refers to all the call options or all the put options listed on an exchange for a particular underlying asset. For instance, if you're looking at Apple Inc. (AAPL) stock, all the calls available for trade form one option class, and all the puts form another related class.

You should know that the number of options you can buy or sell in a given option class depends on the size and trading volume of the underlying asset, along with overall market conditions.

Key Takeaways

Here's what you need to remember: an option class includes all of the same type of option—either calls or puts—listed on the same underlying security. You can break it down further into options series, which are all the calls or puts for an underlying asset that expire in the same month. Keep in mind that an option chain is different; it includes both all the calls and all the puts on a security. And the size of the option class? It hinges on the volume of the underlying asset and the market conditions for both the underlying and its options market.

Understanding Option Classes

Option classes categorize options on an exchange so you, as an investor, can navigate them easily. All major public market exchanges use option classes to list the options available for trade on a given underlying asset. Often, exchanges and financial sites will divide the class into series—an option series covers all the calls or puts at various strike prices with the same expiry for that asset.

Take this example: all the calls or puts expiring in June make up an option series, which is just a part of the larger option class. When you view options quotes, some sites show the entire option class, but more often, it's sorted by expiry date into series.

Options Across the Market

In other markets like over-the-counter (OTC) or institutional ones, you might not see option classes used, due to the complexity and customized nature of the options traded there.

Just like with stocks, you have to trade exchange-traded options through a broker who connects with market makers to facilitate the trades. These exchanges use standard bid-ask pricing models. While option prices come from advanced analytics, their daily trading prices are still driven by supply and demand in the market.

Broker-dealers typically require at least $2,000 in capital to approve an options trading account, and the Options Clearing Corporation (OCC) oversees the rules and regulations for options trading.

Special Considerations

Once you get access to an options trading platform, you'll be able to see the full listing of option classes for your preferred underlying security. Options are usually listed and classified by the ticker of the underlying asset.

On an options brokerage platform, calls and puts on underlying securities are segregated. Calls and puts are the two broadest option classes. Within each, you'll find lists of available strike prices and expirations.

The information provided on each option class depends on your subscription preferences. Some quotes include advanced analytics like Greeks, while others might only show basics like contract name, strike, expiry, bid, ask, last price, last trade time/date, percent change, volume, open interest, and implied volatility.

Real-World Example of an Option Class

Some option classes are large, others small, based on how popular the options market is for the underlying asset. For example, the calls available for trade on the SPDR S&P 500 Trust (SPY) number in the hundreds.

In contrast, as of June 2019, the option class for Barnes Group Inc. (B) was relatively small, with several options available across two expiry dates, while the stock traded at $54.46. All the calls represent the call option class for that stock, and the puts represent the put option class. These classes can grow or shrink as interest increases or decreases, leading to more or fewer options becoming available.