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.
Contract terms are size, grade, delivery place, date etc.
Standardization makes sense only when the same contract changes hands several times before delivery.