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Certain stock exchange members are permitted to write options known as ‘traditional options�. Stock Exchange traditional options also fall within the definition of financial options.

»Ê¹ÚÌåÓýapp Exchange uses a number of distinctive terms to describe the machinery for granting the option. »Ê¹ÚÌåÓýapp purchaser or grantee of the option is said to give for the option and is called the giver'. »Ê¹ÚÌåÓýapp grantor or seller of the option is said to take for the option and is called the takerâ€�. »Ê¹ÚÌåÓýapp premium paid by the grantee is the option rate or option money. »Ê¹ÚÌåÓýapp price at which the option can be exercised is called `the striking priceâ€�.

Traditional options are subject to the rules of the Exchange. »Ê¹ÚÌåÓýapp option is created by a market maker on the instructions of the broker. Options are available on any share dealt in on the Exchange and, in theory at least, on any stock dealt in on any exchange in the world. »Ê¹ÚÌåÓýapp striking price is agreed between the broker and the market maker at the time the option is granted.

»Ê¹ÚÌåÓýappre is no market in the options themselves. »Ê¹ÚÌåÓýapp purchaser, or giver, can either exercise the option or abandon it. »Ê¹ÚÌåÓýappy cannot take a profit by making a closing sale as they can with traded options, see CG55525.

See CG55582 for a comparison of traditional and traded options.