What is the difference between a company option and an exchange traded option?
Company options are issued by companies for the purpose of raising funds. They give shareholders an opportunity to buy new shares at a fixed price on or before a predetermined date. This gives the company the ability to raise funds for future projects. The exercise of company issued options results in an increase in the company’s capital. Exchange traded options are traded over existing shares. Their exercise results in a transfer of ownership of the underlying shares, and not in an increase in the company’s capital. The company is not a party to the contracts traded.
