Single Stock Options

A fund manager who wants to protect shares already held against a fall, or an investor who wants to join a stock price move with less money, can pursue those aims with options on individual stocks.

The right to buy or sell an individual stock at a set price

A single stock option is an option whose underlying asset is the stock of one company. The right to buy the stock at the strike price is a call option (call), and the right to sell it is a put option (put). The buyer pays the seller a premium to obtain the right. How calls and puts work in general is covered in Option Basics: Calls and Puts.

In Japan, single stock options are listed on Osaka Exchange. Osaka Exchange calls them Securities Options, and also promotes them under the Japanese nickname "Kabuopu." The underlyings are securities selected by the exchange from those listed on Japan's stock exchanges. Besides stocks, they include exchange-traded funds (ETFs) and real estate investment trusts (REITs)¹². Each combination of underlying, call or put, contract month and strike price is traded as a separate series. For example, "Company X, put, September contract, strike price 1,500 yen" is one series³.

Consider a hypothetical example in which Company W's stock trades at 2,000 yen with a trading unit of 100 shares. You buy one contract of a call with a strike price of 2,000 yen for a premium of 100 yen. The contract unit of a Securities Option is one trading unit of the underlying stock⁴, so one contract is a right over 100 shares, and the buyer pays 100 yen × 100 shares, or 10,000 yen, in premium.

Exercise means trading the stock at the strike price

Securities Options are European options that can be exercised only on the last trading day. When a call is exercised, the buyer buys the underlying stock at the strike price, and the seller who is assigned the exercise sells the same stock at the strike price. For a put, the buyer sells the stock at the strike price, and the assigned seller buys it⁵. Unlike an equity index option, where only the difference is paid in cash, a Securities Option is settled by trading the stock itself.

Positions that have not been resold or bought back by the last trading day are treated as follows. If an option is in the money (exercising it lets you buy the stock below the market price, or for a put, sell it above the market price), it is exercised automatically unless the buyer gives up the right (declares that it will not be used). If it is out of the money (exercising it would mean buying above the market price, or for a put, selling below it), the position expires unless the buyer exercises it⁵. If you hold the call from the example above until expiry, your profit or loss is as follows. The "gain from exercise" in the table is the value of the stock bought on exercise at the stock price at expiry, minus the amount paid for it.

If the stock price at expiry is 2,500 yen, the buyer exercises and buys 100 shares of Company W for 2,000 yen × 100 shares, or 200,000 yen. The shares are worth 250,000 yen at the stock price at expiry, so after the 10,000-yen premium, the profit is 40,000 yen. If the stock price at expiry is at or below the 2,000-yen strike price, exercising would not let you buy below the market price, so the right is not used and the 10,000 yen paid is your loss. The profit or loss is zero at 2,100 yen, the strike price plus the premium. This price is called the break-even point.

Figure description

Profit and loss at expiry of a call on Company W's stock with a strike price of 2,000 yen, bought for a premium of 100 yen. The horizontal axis is the stock price at expiry, and the vertical axis is the profit or loss per share including the premium. The profit or loss for one contract (100 shares) is 100 times this. At stock prices of 2,000 yen or less, the call is not exercised and the profit or loss stays at −100 yen. Above 2,000 yen, the profit or loss rises by 1 yen for each 1-yen rise in the stock price. It is 0 at 2,100 yen (the break-even point) and a profit of 400 yen at 2,500 yen. The loss is limited to the 100-yen premium paid.

The seller of the call has exactly the opposite profit or loss. If the stock price at expiry is 2,500 yen, the seller is assigned the exercise and must sell shares worth 250,000 yen for 200,000 yen. Even after adding the 10,000-yen premium received, the seller loses 40,000 yen.

Rules for contract months, strike prices and contract units

Strike prices for Securities Options are set at intervals that depend on the level of the underlying stock price. Under the standard rules, for example, the interval is 25 yen for stocks priced below 500 yen, 200 yen for stocks priced from 2,000 yen to below 5,000 yen, and 500 yen for stocks priced from 5,000 yen to below 30,000 yen⁶. When trading in a new contract month starts, five strike prices are set: the one nearest to the previous business day's closing price, and two above and two below it. As the stock price moves, strike prices are added so that at least two stay above and two below the strike nearest to that day's closing price⁶⁷. The main rules for Securities Options are as follows⁸.

Trading began on July 18, 1997⁹. To make trading easier, firms called market makers keep placing buy and sell orders on selected underlyings. The number of underlyings covered by market making rose from 32 to 50 in August 2026¹⁰.

A temporary measure has applied since January 5, 2026. More strike prices are set at finer intervals than the standard rules for Securities Options whose underlyings are covered by market makers' quotes (prices at which they offer to buy and sell) under the Market Maker Scheme. For example, for stock prices from 2,000 yen to below 5,000 yen, the interval is 100 yen, and 10 strikes are set above and 10 below, both when a new contract month starts and when strikes are added¹¹.

Adjusting the strike price and other terms after a stock split

When the company behind the underlying stock splits its shares, Osaka Exchange lowers the strike price of the Securities Options in line with the split ratio. At the same time, it increases either the open interest (the number of options held) or the number of shares delivered per contract¹². Without an adjustment, the stock, now worth less per share, would be delivered at the strike price set before the split. The call buyer would then suffer a loss that was not expected when the contract was made¹³.

For a split by a whole-number ratio, such as one share into two, the open interest is increased. An investor holding one contract (100 shares) with a strike price of 1,000 yen has the position adjusted to two contracts with a strike price of 500 yen. Before the split, exercising means a trade of 1,000 yen × 100 shares, or 100,000 yen. After the split, it means a trade of 500 yen × 200 shares, also 100,000 yen, so the value of the option does not change¹⁴.

For a split by a ratio that is not a whole number, the open interest stays the same and the number of shares delivered per contract is increased¹². For example, for a stock with a trading unit of 100 shares and a split of one share into 1.5 shares, the shares delivered per contract rise from 100 to 150. The 50 shares below the trading unit cannot be delivered as stock, so on exercise, 100 shares are delivered, and the remaining 50 shares are settled in cash, valued at the underlying stock's closing price on the exercise date¹⁵. Ordinary dividends, on the other hand, do not trigger an adjustment. As a rule, public offerings of new shares, share buybacks, exercises of share options and similar events do not trigger one either¹⁶.

Differences from equity index options

Securities Options and equity index options are both options listed on Osaka Exchange, but they differ in their underlying assets and how they are settled. Nikkei 225 Options are settled on the SQ day (the business day after the last trading day) by paying the difference between the strike price and the special quotation (SQ value), whereas Securities Options are settled by trading the stock itself⁵¹⁸. The main differences are as follows¹⁹.

Single stock options listed on Cboe in the United States are, as a rule, American options that can be exercised on any business day up to the expiration date. When an exercise notice is given, the stock is delivered on the business day after the exercise²⁰.

Taking part in stock price moves with less money

The buyer of a call or put pays only the premium up front, so they can take part in stock price moves with less money than buying the stock. This property is called the effect of leverage²¹. In the first section's example, buying 100 shares of Company W at 2,000 yen takes 200,000 yen, while one call contract takes 10,000 yen. Comparing buying the stock with buying the call at different stock prices at expiry gives the following.

If the stock price rises to 2,500 yen, the 50,000-yen profit on the stock is 25% of the amount paid, while the 40,000-yen profit on the call is four times the amount paid. If the stock price falls to 1,600 yen, the loss on the stock is 40,000 yen, only 20% of the amount paid, while the call loses the whole 10,000 yen paid. Although the call's loss is smaller in yen, its profit or loss swings much more widely relative to the money paid.

Risks

The buyer's loss is limited to the premium paid, 10,000 yen in the first section's example. In exchange for receiving the premium, the seller takes on the obligation to deliver or take delivery of the stock at the strike price if assigned an exercise. The call seller's loss grows the higher the stock price rises. For this reason, the seller posts margin, while the buyer trades with the premium alone and posts no margin²¹. How exchange margin works is covered in Futures Margin and Daily Settlement.

If you want to end a position before expiry, you can close it with an offsetting trade: the buyer resells and the seller buys back⁵.

Notes

1. Osaka Exchange, "有価証券オプション 商品概要" (Securities Options: product overview, in Japanese; updated October 10, 2025; English version: "Overview", https://www.jpx.co.jp/english/derivatives/products/individual/securities-options/index.html), the "商品概要" (Product overview) section. The source says the options are "also called 'share certificate options' or 'single stock options'" (our translation). ↩

2. Osaka Exchange, "有価証券オプション 制度概要" (Securities Options: contract specifications, in Japanese; updated January 5, 2026; English version: "Contract Specifications", https://www.jpx.co.jp/english/derivatives/products/individual/securities-options/01.html), the "原資産" (Underlying asset) row. ↩

3. Osaka Exchange, "有価証券オプション 銘柄" (Securities Options: series, in Japanese; updated September 25, 2026), "銘柄の設定例" (Example of a series). ↩

4. Osaka Exchange, "有価証券オプション 制度概要" (Securities Options: contract specifications, in Japanese), the "取引単位" (Contract unit) row. ↩

5. Japan Securities Clearing Corporation, "有価証券オプション取引の決済方法" (Settlement methods for Securities Options trading, in Japanese). ↩ ↩² ↩³ ↩⁴

6. Osaka Exchange, "有価証券オプション 制度概要" (Securities Options: contract specifications, in Japanese), "新規設定" (New setting) and "追加設定" (Additional setting) in the "権利行使価格" (Exercise price) row, and the table of intervals. The contract specifications state that strikes for some Securities Options are set differently from the table. ↩ ↩²

7. Osaka Exchange, "有価証券オプション 銘柄" (Securities Options: series, in Japanese), "新たに権利行使価格を設定する場合" (When exercise prices are newly set) and "現物の価格が変動し、既存の権利行使価格と乖離した場合" (When the price of the underlying moves away from the existing exercise prices) under "権利行使価格" (Exercise price). ↩

8. Osaka Exchange, "有価証券オプション 制度概要" (Securities Options: contract specifications, in Japanese), the "原資産" (Underlying asset), "限月取引" (Contract months), "取引最終日" (Last trading day), "権利行使日" (Exercise date), "権利行使価格" (Exercise price), "取引単位" (Contract unit), "値幅制限" (Daily price limits) and "立会時間" (Trading hours) rows. Checked on September 25, 2026. ↩

9. Osaka Exchange, "有価証券オプション 制度概要" (Securities Options: contract specifications, in Japanese), the "取引開始日" (Trading start date) row. ↩

10. Osaka Exchange, "有価証券オプション 銘柄" (Securities Options: series, in Japanese), "マーケットメイク対象銘柄" (Underlyings covered by market making). ↩

11. Osaka Exchange, "有価証券オプションの権利行使価格の設定方法に係る臨時運用について" (Temporary measures for setting exercise prices of Securities Options, in Japanese; applied from January 5, 2026), the table in "権利行使価格の刻み幅及び本数" (Interval and number of exercise prices). The measures apply to Securities Options whose underlyings are "underlyings covered by quote presentation under the Market Maker Scheme" (our translation). ↩

12. Osaka Exchange, "有価証券オプション取引 コーポレートアクション発生時の対応について" (Securities Options trading: measures taken in response to corporate actions, in Japanese; 2nd edition, August 2025), the table in "２.１ 調整対象となるコーポレートアクションとその調整方法" (2.1 Corporate actions subject to adjustment and adjustment methods), page 3. ↩ ↩²

13. Osaka Exchange, "有価証券オプション取引 コーポレートアクション発生時の対応について" (Securities Options trading: measures taken in response to corporate actions, in Japanese), "１ コーポレートアクション時のオプション調整" (1 Adjustment of options for corporate actions), page 2. ↩

14. Osaka Exchange, "有価証券オプション取引 コーポレートアクション発生時の対応について" (Securities Options trading: measures taken in response to corporate actions, in Japanese), "３.１ 株式分割、無償割当" (3.1 Stock splits and gratis allotments), pages 6–8. ↩

15. Osaka Exchange, "有価証券オプション取引 コーポレートアクション発生時の対応について" (Securities Options trading: measures taken in response to corporate actions, in Japanese), "株式分割が小数倍となるケース" (Cases where the split ratio is not a whole number) in "３.１ 株式分割、無償割当" (3.1 Stock splits and gratis allotments), pages 9–12. ↩

16. Osaka Exchange, "有価証券オプション取引 コーポレートアクション発生時の対応について" (Securities Options trading: measures taken in response to corporate actions, in Japanese), "２.３ 調整対象とならないコーポレートアクション" (2.3 Corporate actions not subject to adjustment), page 4. ↩

17. Osaka Exchange, "有価証券オプション取引 コーポレートアクション発生時の対応について" (Securities Options trading: measures taken in response to corporate actions, in Japanese), "２.２ 銘柄調整に係る留意事項" (2.2 Points to note on adjustment of series), page 4. ↩

18. Japan Securities Clearing Corporation, "指数オプション取引の決済方法" (Settlement methods for index option trading, in Japanese). ↩

19. Japan Exchange Group, "日経225オプション 制度概要" (Nikkei 225 Options: contract specifications, in Japanese; English version: "Contract Specifications", https://www.jpx.co.jp/english/derivatives/products/domestic/225options/01.html), the "SQ日" (SQ day), "権利行使日" (Exercise date), "取引単位" (Contract unit) and "権利行使価格" (Exercise price) rows. ↩

20. Cboe, "Equity Options Specifications," "Exercise Style" and "Settlement of Option Exercise." The source says that equity options "generally may be exercised on any business day up to and including on the expiration date." ↩

21. Osaka Exchange, "有価証券オプション 商品概要" (Securities Options: product overview, in Japanese), "かぶオプの3つの魅力" (Three attractions of Kabuopu): leverage, limited risk and hedging. ↩ ↩²