CHAPTER 4
Exchange-Traded Options
Exchange-Traded Options are options traded on a regulated exchange where the terms of every option are standardized by the exchange. The contract is standardized in a way that the underlying asset, quantity, expiration date, and strike price are known to all parties in advance. When options are in the money or at the money, they are characteristically exercised and settled through a clearinghouse.
The characteristics of exchange-traded options are:
• All the option terms are standardized except for the price.
• The exchange will establish the expiration date and expiration prices as well as minimum price quotation unit.
• The exchange will also establish if the option is American or European.
• The exchange ...
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