An option is a derivative that allows the holder the right to purchase or sell securities at a predefined price (called the "strike price"). Options are issued against a variety of [Equities](πŸ”—ο»Ώ), and typically 1 contract represents 100 shares of the underlying equity.

## Types of options

  • **Call options** allow the holder to _purchase_ the underlying at the strike price, on or before the expiration date

  • **Put options** allow the holder to _sell_ the underlying at the strike price, on or before the expiration date

## Buying an option contract

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Not all investors are qualified to trade options, based on their prior experience with investing. Each Account must be individually enrolled before placing a trade. Learn more in [Enabling options access](πŸ”—ο»Ώ).

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Options trade on public exchanges on most business days from 9:30am to 4pm ET. During this time, orders are accepted to buy and sell at a price specified by the customer. The price of every contract updates every few milliseconds to represent the last trades that took place.

Typically, finding options to buy starts with picking an underlying security. Once a security is picked, an investor narrows the list of candidates by expiration date.

Learn more in [Showing options chains](πŸ”—ο»Ώ).

## Owning an option contract

Like other assets, option prices change rapidly throughout the business day. Quotes can be retrieved just like retrieving a quote for the equity. Read more in [Displaying prices and information](πŸ”—ο»Ώ).

### During corporate actions

Corporate actions that affect the underlying security (splits, dividends, mergers, etc.) typically also affect options. In most cases, the original option Instrument is marked `INACTIVE`, and a new option Instrument is created for existing positions.

### At expiration day

On the day that options expire, we automatically determine which options are in-the-money (where the strike price is better than the spot price of the underlying security). These contracts will either be exercised automatically, if the investor has enough shares or cash to complete the exercise (see below), or they will be liquidated as if the investor sold directly to the market.

### Exercising

Contract holders can choose to exercise their right to purchase or to sell the underlying security based on the number of contracts they hold. This can be done up until the date of expiration.

For a call option holder, the investor must have enough cash in their account to complete the purchase (typically, the number of contracts Γ— the strike price Γ— 100).

For a put option holder, the investor must have enough shares in their account to complete the sale (typically, the number of contracts Γ— 100).

For now, exercising is a manual step that is done by communication with our Operations team.