Chapter 01 · Section 1.1

Contract Terms

                       OTC OPTIONS      EXCHANGE-TRADED OPTIONS
 

Contract Terms          .........          standard
Delivery                .........          less than 10%
Trading                 .........          centralized
Credit Risk             .........          clearing house
Liquidity               .........          generally high
Margin calls            .........          minimum margin regulated

With OTC options, contract terms are:

a) set by the exchange and therefore standardized.
b) negotiated by the parties to the contract.
• c) determined by the broker.
  No. The broker may bring OTC contracting parties together, but does not set the terms of the contract.

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