<p><strong>Optionable Stock</strong> refers to a stock that is eligible for options trading. Options are derivative contracts that give the holder the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a specified price (strike price) on or before a certain date (expiration date).</p>

<h2>How It Works</h2>
<p>For a stock to be optionable, it must meet certain criteria set by the options exchange. These include:</p>
<ul>
  <li>Minimum average daily trading volume</li>
  <li>Minimum price per share</li>
  <li>Other liquidity and market capitalization requirements</li>
</ul>
<p>Once a stock is optionable, options contracts can be traded on it. Each contract represents 100 shares of the underlying stock. The strike price and expiration date determine the contract's details.</p>

<h2>Why It Matters</h2>
<p>Optionable stocks matter to investors for several reasons:</p>
<ul>
  <li><strong>Hedging:</strong> Investors can use options to protect their stock holdings from price declines.</li>
  <li><strong>Speculation:</strong> Options allow investors to bet on the direction of a stock's price with less capital outlay than buying the stock outright.</li>
  <li><strong>Income Generation:</strong> Investors can sell (write) covered calls or cash-secured puts to generate income from option premiums.</li>
</ul>
<p>For example, an investor who owns 1,000 shares of an optionable stock might sell a covered call with a strike price at the current stock price. If the stock price doesn't rise above the strike price by expiration, the investor keeps the premium received and can write another call, generating additional income.</p>