When a company comes out with a book-built IPO, they have to give an indicative price band. This price band will be based on the assessment of the value of the stock and also on the basis of the price at which the market feedback hints at full subscription. This price band refers to the band on the range in which investors are eligible to bid. Any application that is received outside this range is automatically rejected. Of course, retail investors have the option of just bid at cut-off and the shares will then be automatically allotted to them at the discovered price.
A green shoe option is something different. It is the authorization to retain a part of the oversubscription as monies raised even if the size ends up being larger than the originally anticipated IPO size. Green Shoe Option is a lot more common in debt issues. A greenshoe option has the permission to retail oversubscription up to a certain pre-defined limit. For example, if there is an issue of Rs.500 crore with a Rs.250 crore greenshoe option, then the company in question can collect up to Rs.750 crore without seeking any further approval. The green shoe option has to be decided, fixed and communicated well in advance. You can exercise a greenshoe option as an afterthought.