Chapter 01 · Section 1.1
Trading
OTC OPTIONS EXCHANGE-TRADED OPTIONS
Contract Terms negotiated standard
Delivery perhaps 50% less than 10%
Trading ......... centralized
Credit Risk ......... clearing house
Liquidity ......... generally high
Margin calls ......... minimum margin regulated
OTC options are traded:
a) by open auction on a centralized trading floor.
b) through a negotiated arrangement between buyer and writer.
Remember, OTC means "over the counter". Just imagine the buyer in front of the counter and the seller behind it.