Chapter 04 · Section 4.1

Delivery or Settlement

• 1. Assures the financial integrity of the market.
• 2. Matches trades and facilitates the flow and transfer of funds.
• 3. Provides a mechanism for delivery or cash settlement.

• a) always follows delivery; the call holder (put writer) pays the exercise price for the underlying asset.
  No. If the underlying asset is delivered there is no need for cash settlement.
  b) is a substitute for delivery.
  c) is only used for options that are not exercised, i.e. offset against each other.

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