<\/span><\/h2>\n\n\n\nThere are three types of Greenshoe options, and each one uses a unique method to keep prices stable: <\/p>\n\n\n\n
1. Full Greenshoe Option<\/strong> \u2013 In the event of high demand, the Full Greenshoe option allows underwriters to purchase an additional 15% of the shares originally offered from the issuer at the predetermined price. The underwriter then sells these shares in the market at a profit and tries to control the steep price rises. This also helps in increasing liquidity.<\/p>\n\n\n\n2. Partial Greenshoe Option<\/strong> \u2013 In this type, the underwriters can issue more than the shares initially offered but don\u2019t issue the maximum number of shares permitted, i.e., 15%. The underwriters buy additional shares, less than 15% of the issue size, from the company and sell them in the stock market to control excess demand.<\/p>\n\n\n\n3.<\/strong> Reverse Greenshoe Option<\/strong> \u2013 The underwriters use this option to protect against sharp declines in share prices on the listing date. In this option, underwriters purchase the shares from the stock market and sell them back to the issuer company at the offer price. <\/p>\n\n\n\n