Australian companies with public share ownership are listed on the Australian Securities Exchange (ASX). In mid 2009 roughly 2,000 domestic and 80 international companies and securities were listed on the ASX. The number changes with every newly listed company, and with every one that ceases to exist.
When a stock is “optionable” investors are able to purchase “Exchange Traded Options” (ETO) on the underlying stock, giving them the right to buy or sell shares of the optionable stock at a set price. Not all companies whose shares can be traded publicly through an exchange are optionable though. The easiest way to check whether a stock is optionable is to go to the ASX website and check whether there are options listed for the particular stock.
Of the more than 2,000 stocks listed on the ASX in mid 2009, only about 120 were optionable stocks.
Liquidity of ASX options
Some options are not necessarily traded as frequently as their underlying stock or as options over other stocks. They are less “liquid”. The liquidity of an option takes into account the daily volume and the open interest of that option. Low liquidity equates to a stock whose options are not frequently traded, while high liquidity refers to a stock which is traded heavily every day. Stocks with very low liquidity are called “illiquid”.
Options with low liquidity should be avoided, because it can be difficult to have your order filled, or to get a fair price.
Of the 120 optionable stocks listed on the ASX in mid 2009, only about 15 to 20 are liquid enough for us to trade them confidently.
If you would like to learn how to trade options, please consider our Options Base Camp seminar.
We also welcome you to log on to one of our Free Market Briefings, which we hold every 4 to 6 weeks.