ThePennyGuru, seriously? I can’t believe you asked me that question. An option, as the name implies is simply the option to either buy or sell a particular equity at a specified price. It is not, and I repeat, not an obligation to buy or sell. Delivery may never have to occur and therefore does not have to represent the number of available underlying shares, ever. Should I go on?
I guess I should. Were you also not aware that fully 80% of all quoted options expire worthless, unexercised or otherwise remaining unpriced throughout the life of the option? And if I may go even further, options are a derivative instrument that “derive” their value from the underlying asset and can trade wholly independently from the stock save for a well understood price relationship (Black Scholes, Binomial Pricing Model, Closed-Form GARCH Option Pricing Model ) called the premium and the “Greeks” that govern the relationship between the price of the option and the underlying never requiring either option counterparty to take delivery of the associated shares, a point I have now made twice. If you can somehow process that notion, you may realize that you probably should not have asked that question.
By way of example.
Let's say I want to buy to open the Aug 22 call which as of today is trading for a nickle. As long as I am offering at least the ask on by offer to buy and I have the money, I can buy 1000 option representing 100,000 shares and it might cost me all of about $5000.00. That trade, since it is an opening trade will show up as 1000 contracts open interest. Do I have to take delivery of those shares. No! I can sell the option to some other poor chap who may no know better, highly unlikely, or, in all probability, if ZAGG remains right where it is through expiration, the position expires worthless, no shares ever required. See how that works?
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