Equity Options

Exchange traded equity options are "physical delivery" options. This means that there is a physical delivery of the underlying stock to or from your brokerage account if the option is exercised. The owner of an equity option can exercise the contract at any time prior to the exercise deadline set by the investor?s brokerage firm. Generally this deadline occurs on the option?s last day of trading. The expiration date for equity options is the Saturday following the third Friday of the month. If the third Friday of the month is an Exchange holiday, the last trading day is the Thursday immediately preceding the holiday. After the option?s expiration date, the equity option will cease to exist.

For additional information on equity options, visit the Equity Option Strategies section of the web site, or download the Understanding Stock Options brochure (Acrobat format).

Equity Options Product Specifications

Symbol:
For listed stock, the option symbols are the same as for the underlying stock. Symbols for options on qualified over-the-counter securities vary according to the vendor. Visit the CBOE Symbol Directory for specific symbols.

Underlying:
Generally, 100 shares of common stock or American Depository Receipts ("ADRs") of companies that are listed on securities exchanges or trade over-the-counter.

Strike Price Intervals:
Generally, 2 1/2 points when the strike price is between $5 and $25, 5 points when the strike price is between $25 and $200, and 10 points when the strike price is over $200. Strikes are adjusted for splits, re-capitalizations, etc.

Strike (Exercise) Prices:
In-, at- and out-of-the-money strike prices are initially listed. New series are generally added when the underlying trades through the highest or lowest strike price available.

Premium Quotation:
Stated in points and fractions. One point equals $100. Minimum tick for options trading below 3 is .05 and for all other series, .10.

Expiration Date:
Saturday immediately following the third Friday of the expiration month.

Expiration Months:
Two near-term months plus two additional months from the January, February or March quarterly cycles.

Exercise Style:
American - Equity options generally may be exercised on any business day before the expiration date.

Settlement of Option Exercise:
Exercise notices properly tendered on any business day will result in delivery of the underlying stock on the third business day following exercise.

Position and Exercise Limits:
Limits vary according to the number of outstanding shares and past six-month trading volume of the underlying stock. The largest in capitalization and most frequently traded stocks have an option position limit of 250,000 contracts (with adjustments for splits, re-capitalizations, etc.) on the same side of the market; smaller capitalization stocks have position limits of 200,000, 75,000, 50,000 or 25,000 contracts (with adjustments for splits, re-capitalizations, etc.) on the same side of the market. The number of contracts on the same side of the market that may be exercised within any five consecutive business days is equal to the position limit. Equity option positions must be aggregated with equity LEAPS positions on the same underlying for position and exercise limit purposes. Exemptions may be available for certain qualified hedging strategies.

Reporting Requirements:
Please refer to Exchange Rule 4.13 for information pertaining to reporting requirements for positions in excess of 200 contracts.

Margin:
Purchases of puts or calls with 9 months or less until expiration must be paid for in full. Writers of uncovered puts or calls must deposit / maintain 100% of the option proceeds* plus 20% of the aggregate contract value (current equity price x $100) minus the amount by which the option is out-of-the-money, if any, subject to a minimum for calls of option proceeds* plus 10% of the aggregate contract value and a minimum for puts of option proceeds* plus 10% of the aggregate exercise price amount. (*For calculating maintenance margin, use option current market value instead of option proceeds.) Additional margin may be required pursuant to Exchange Rule 12.10.

Last Trading Day:
Trading in equity options will ordinarily cease on the business day (usually a Friday) preceding the expiration date.

Trading Hours:
8:30 a.m. - 3:00 p.m. Central Time (Chicago time).