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Option Class

Moneyzine Editor
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Moneyzine Editor
1 mins
September 20th, 2023
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Definition

The term option class refers to the total of all call or put options available for the same underlying asset. Option class refers not just to the type of option, but also the style of option such as European or American.

Explanation

An individual can gain a better understanding of the overall market sentiment towards a particular security by examining its option class. The availability of various types of options for purchase or sale within a given option class, as well as trading volumes, provides insights into the market's interest in the underlying asset.

For example, the number of options to buy a security (calls), the number of options to sell a security (puts) as well as the premiums paid and received for these options can provide insights into the market's expectations of the security's volatility and direction in the near term. In the same fashion, the activity for Long Term Equity AnticiPation Securities, or LEAPs, can provide investor insights into the longer term outlook for a security.

Related Terms

collar, opening transaction, closing transaction, cash settlement

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