The maximum number of option contracts that an investor can hold on one side of the market. Accordingly, long calls and short puts are considered to be on the same side of the market. Likewise, the same can be said about short calls and long puts. For example, options on the large cap stocks have position limits of 250,000 contracts. Smaller capitalization stocks have position limits of 200,000, 75,000, 50,000, or 25,000 contracts.
Position limits, like exercise limits, help guard the market off any adverse influences resulted from the activities of an individual investor or a group of investors.
