Options trading markets PREPARED BY: WALID SAAFAN Options trading markets Financial Derivatives - Assignment 1 Arab Academy for Science and Technology Under supervision of Dr. Ahmed Bahaa 5/9/2009 This document present an example of option trading market including its listing regulation and a sample terms for three traded option contracts
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CHICAGO BOARD OPTIONS EXCHANGE CBOE On April 26, 1973, the CBOE pioneered the concept of standardized, listed stock options to be traded on a centralized,
regulated marketplace. Listing call options on just 16 stocks, CBOE traded 911 contracts on that first day of business. In
1977, put options were introduced.
The CBOE's 45,000 square-foot trading floor opened for trading in February of 1984. The exchange is cabled with more
than 50,000 miles of electrical wire, most of it beneath the trading floor. There is enough phone cable to serve a city of
200,000 people; and more information display screens under one roof than any other building in the world. The
concentration of technology requires as much electricity as the nearby 110-story Sears Tower.
The Options Clearing Corporation is the sole issuer of all securities options listed at the CBOE, four other U.S. stock
exchanges and the National Association of Securities Dealers, Inc. (NASD), and is the entity through which all CBOE
option transactions are ultimately cleared. As the issuer of all options, OCC essentially takes the opposite side of every
option traded. Because OCC basically becomes the buyer for every seller and the seller for every buyer, it allows options
traders to buy and sell in a secondary market without having to find the original opposite party.
The OCC substantially reduces the credit risk aspect of trading securities options as the OCC requires that every buyer
and every seller have a clearing member and that both sides of the transaction are matched. It also has the authority to
make margin calls on firms during the trading day. The OCC has a AAA credit rating from Standard & Poor's Corporation.
Listing requirements Among the requirements a company must satisfy is “distribution”. There must be a certain number of outstanding
shares, and the shares must be owned by a minimum number of people. Otherwise, ownership of the stock is deemed
“too highly concentrated”. The NYSE and NASDAQ also have listing requirements.
The contract size of an option refers to the amount of the underlying asset covered by the options contract. For each
unadjusted equity call or put option, 100 shares of stock will change hands when one contract is exercised by its owner.
These 100 shares of underlying stock are also referred to as the contract's "unit of trade."
The contract size of a cash-settled index option is determined by its multiplier. The multiplier determines the aggregate
value of each point of the difference between the exercise price of the option and the exercise settlement value of the
underlying interest. For example, a multiplier of 100 means that for each point by which a cash-settled option is in the
money upon exercise, there is a $100 increase in the cash settlement amount.
Listing of new foreign referenced commodity derivatives will be done on request from the market. However, these securities must comply with the requirements prescribed by the JSE. The requirements include-
the underlying security must be an internationally listed instrument;
a committed Liquidity Provider; and
the availability of a reference price on day of listing and prices thereafter.
Mnemo ING Market Liffe Amsterdam Vol. 93,688 06/05/09
Exercise type American Currency € O.I. 3,794,357
Underlying ING GROEP ISIN NL0000303600 Market Euronext Amsterdam
Currency € Last 7.72 06/05/09 17:36 Last change % 0.52 Volume 24,280,468.00 Best bid 7.72 06/05/09 17:38 Best ask 7.725 06/05/09 17:38
Dutch Stock Options
Contract size 100 shares
Expiry months 1,2,3 monthly; 3,6,9,12 quarterly (March, June, September, December); 18 half yearly (June, December) and 12, 24, 36, 48, 60 yearly (December). See ‘Related documentation’ below to find out which expiry months are listed per stock.
Quotation Euros per share
Minimum price movement (tick size and value)
€0.05 / €5
Exercise day Exercise by 19.15 Amsterdam time on any business day, extended to 19.45 Amsterdam time on the Last Trading Day
Last trading day Until 17.30 Amsterdam time on the third Friday of the expiry month, provided this is a business day. If not, the last day of trading is the last business day preceding the third Friday in the expiry month.
Settlement Delivery of 100 shares through the settlement system of LCH.Clearnet SA.
Currency € Last 4.262 05/05/09 17:39 Last change % 0.52 Volume 19,656,884.00 Best bid 4.262 05/05/09 17:40 Best ask 4.263 05/05/09 17:40
Dutch Stock Options
Contract size 100 shares
Expiry months 1,2,3 monthly; 3,6,9,12 quarterly (March, June, September, December); 18 half yearly (June, December) and 12, 24, 36, 48, 60 yearly (December). See ‘Related documentation’ below to find out which expiry months are listed per stock.
Quotation Euros per share
Minimum price movement (tick size and value)
€0.05 / €5
Exercise day Exercise by 19.15 Amsterdam time on any business day, extended to 19.45 Amsterdam time on the Last Trading Day
Last trading day Until 17.30 Amsterdam time on the third Friday of the expiry month, provided this is a business day. If not, the last day of trading is the last business day preceding the third Friday in the expiry month.
Settlement Delivery of 100 shares through the settlement system of LCH.Clearnet SA.
Currency € Last 1.854 06/05/09 13:13 Last change % 3.00 Volume 12,296,775.00 Best bid 1.854 06/05/09 13:13 Best ask 1.858 06/05/09 13:13
Dutch Stock Options
Contract size 100 shares
Expiry months 1,2,3 monthly; 3,6,9,12 quarterly (March, June, September, December); 18 half yearly (June, December) and 12, 24, 36, 48, 60 yearly (December). See ‘Related documentation’ below to find out which expiry months are listed per stock.
Quotation Euros per share
Minimum price movement (tick size and value)
€0.05 / €5
Exercise day Exercise by 19.15 Amsterdam time on any business day, extended to 19.45 Amsterdam time on the Last Trading Day
Last trading day Until 17.30 Amsterdam time on the third Friday of the expiry month, provided this is a business day. If not, the last day of trading is the last business day preceding the third Friday in the expiry month.
Settlement Delivery of 100 shares through the settlement system of LCH.Clearnet SA.