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Options Quick Facts - Marketplace


What are regular trading hours for equity options?

Equities: 8:30 a.m. to 3:00 p.m. Central Time
Indexes: Trading hours vary depending upon the index product. Please check the specification page of the Index in question, by visiting the Products section of CBOE.com.



What is the OCC?

The Options Clearing Corporation is the sole issuer of all options listed at the CBOE and other U.S. options exchanges, 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 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.



Can I place my order directly with the CBOE?

No. All orders must be entered via a broker/dealer or online trading network, either of which will send the order to the CBOE for execution. Your marketable orders may be executed electronically and immediately, or represented by a floor broker via open outcry, depending on the order type and the broker/dealer's parameters for routing orders. If not marketable, your orders may rest in an electronic book for execution when their price limits are met.



How do I realize a profit on a long option position before expiration?

After purchasing a call or put option and it increases in value, you then have an unrealized profit. This profit may be realized (taken) at any time by selling the option in the marketplace with a closing sale transaction. To do so, you simply place an order to sell a contract with the same terms at either your desired limit price (limit order) or immediately at the best current market price (market order). Closing out a long call position in no way involves a put transaction. Closing out a long put position in no way involves a call transaction. Of course, you are also free to exercise an American-style call or put before expiration. However, check with your broker on the advisability of doing so.



How do I realize a profit on a short option position before expiration?

After writing a call or put option and it decreases in value, you then have an unrealized profit. This profit may be realized (taken) at any time by closing out the option position in the marketplace with a closing purchase transaction. To do so, you simply place an order to buy a contract with the same terms at either your desired limit price (limit order) or immediately at the best current market price (market order). Closing out a short call position in no way involves a put transaction. Closing out a short put position in no way involves a call transaction. As long as you close out a short position in this manner before you are assigned, you no longer have the obligations inherent in the short contract.



What is a market-maker?

Market-makers are exchange members who provide liquidity in the marketplace by risking their own capital in making bids and offers for their own accounts in the absence of public buy or sell orders. They are the backbone of the CBOE's trading system.



Does the CBOE set bid and ask prices for options?

No. The CBOE is an exchange, a marketplace where prices are determined by competitive bid and ask prices from its members trading for their own accounts, industry professionals and individual, public investors via orders sent to CBOE by their brokerage firms.



Does a "specialist" buy and sell options?

Many option classes traded at CBOE, including all equities and certain index products traded on CBOE Hybrid trading system, have a Designated Primary Market-Maker (DPM). The DPM is a market-maker who is obligated to make continuous bid and ask prices in all option series in his appointed option classes. In return, the DPM is guaranteed certain rights to participate in each trade, either electronic or in open-outcry. In addition to, or in the absence of a DPM (e.g., those classes not traded on the Hybrid system) many option classes at CBOE also have independent market-makers who make bid and ask prices from either the trading floor or remotely. Ultimately, however, your orders are executed with the CBOE's current best available bid or offer. This party may be an option professional or an individual investor via an option order.



What is Time and Sales?

Time and Sales is CBOE's audit trail of last sales and quotes. It lists this information by time.



Why are there such widely varying prices on the same option between different exchanges?

When you view an option quote chain, either on this Website or through your brokerage firm or quote provider, you may see "last sale" prices that vary between exchanges that trade a particular option. These last sales may have occurred at different times in the past - minutes, hours, or even days ago. For instance, you might see that CBOE's last sale price for an XYZ June 60 call was $3.50 that occurred minutes before, and the last sale for the same option on the ISE as $5.00 that occurred the day before (and hasn't traded since). To more accurately compare prices for an option on various exchanges you might compare their currently disseminated bid and ask prices instead.



Do corporations who issue stock determine whether listed options are traded on their shares?

No. Companies whose shares underlie exchange-listed equity options have no input on whether options are traded or not. The individual exchanges decide which stocks on which to list equity options.



Are there requirements for individual stock issues to underlie exchange-listed equity options?

Yes, option exchanges have certain eligibility requirements for stocks to become "optionable." Among the criteria are share price, number of shares outstanding, average daily volume, and "distribution" (i.e. shares outstanding owned by a minimum number of investors). The NYSE and NASDAQ also have their own listing requirements. Although CBOE has staff that is constantly reviewing stocks that are candidates for listing, it is possible that a stock has been overlooked. If you feel this might be the case, you can contact the CBOE and suggest it.



What happens when a class of options is "delisted"?

If a stock fails to maintain the minimum exchange standards for being optionable, that class of options may be "delisted." In this case, no new option series will be added at expiration, but those series already listed will continue to trade until they expire. If trading on an underlying stock is suspended by its primary market for an extraordinary reason the options exchanges will specify a procedure for the orderly liquidation of option open interest in a special bulletin.

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