Chapter 01 · Section 1.1

The secondary market for OTC options

                       OTC OPTIONS      EXCHANGE-TRADED OPTIONS
 


Contract Terms          negotiated         standard
Delivery                perhaps 50%        less than 10%
Trading                 by arrangement     centralized
Credit Risk             parties            clearing house
Liquidity               .........          generally high
Margin calls            .........          minimum margin regulated

The secondary market for OTC options is:

The secondary market allows the resale of an option. An OTC option cannot always be easily resold, repurchased or otherwise compensated. Liquidity can be measured in various ways. One of them is how big thepread between a purchase and a sale price is likely to be.