SIE (Training Consultants v3.5, 2025): Ch. 3 Equity Options, Sect. 7 – OCC, Option Exchanges, and Trading

Options Clearing Corporation (OCC)

The issuer, clearing agency, and guarantor of all listed U.S. options; operates under SEC jurisdiction.

OCC Member Exchanges

Own and operate the OCC; also called Self-Regulatory Organizations (SROs).

Options Exchanges (U.S.)

Philadelphia Stock Exchange (PHLX), Boston Stock Exchange (BSE), NYSE American (AMEX), CBOE, NYSE-Euronext (NYX), International Securities Exchange (ISE), Nasdaq Options Market (OMX).

Option Premium Quote

Bid = price received when selling; Ask = price paid when buying.

Trading Rotations

Options open sequentially by earliest expiration month and lowest exercise price; similar process occurs at market close.

Order Book Official (OBO)

CBOE employee who handles public limit orders, must execute these before floor orders at same/better price.

Market Maker

Trades on the exchange floor for own account; does not have priority over public orders.

Option Execution Systems

CBOE Hybrid = floor + electronic trading; CBOE OSS = electronically routes orders directly to trading post.

Cease Trading

4:00 p.m. ET on the third Friday of expiration month.

Exercise Cut-Off Time

5:30 p.m. ET on the third Friday of expiration month.

Option Expiration

11:59 p.m. ET (third Friday of expiration month).

Position Limits

Maximum number of option contracts on same stock and same side of market.
• Bullish = Long Calls + Short Puts
• Bearish = Long Puts + Short Calls

Exercise Limits

Maximum number of option contracts that may be exercised within any consecutive 5-business-day period.

Who guarantees listed U.S. options?

The Options Clearing Corporation (OCC).

Which organization oversees the OCC?

SEC (Securities and Exchange Commission).

What is the difference between a Bid and an Ask?

Bid = price you sell an option; Ask = price you buy an option.

Who executes public limit orders on CBOE?

Order Book Official (OBO).

Can market makers’ orders take priority over public orders?

No.

When does trading in options cease?

4:00 p.m. ET on the third Friday of the expiration month.

When is the exercise cut-off time for options?

5:30 p.m. ET on the third Friday of the expiration month.

When do options officially expire?

11:59 p.m. ET on the third Friday of the expiration month.

What is a bullish position on options?

Long Calls + Short Puts.

What is a bearish position on options?

Long Puts + Short Calls.

What are position limits?

Maximum number of contracts on the same stock and same side of market that an investor can hold.

What are exercise limits?

Maximum number of listed option contracts an investor may exercise within any 5 consecutive business days.