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18 Cards in this Set
- Front
- Back
what is the largest options exchange?
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CBOE, almost no trading in OTC
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Who must approve option contracts on equities?
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the SEC
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What are the requirements to list options?
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-issuer must be actively traded on the NYSE, AMEX or NASDAQ markets
-if the issuer is de-listed from its market, its options are too ---if this happens no new issues, but existing ones can trade -if stock stops trading on principle exchange, the option stops as well |
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Who executes transactions on CBOE and what do they do?
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-FLOOR BROKER
-trades with another floor broker, a market maker or an Order Book Official -earns a fee per transaction -DO NOT HOLD INVENTORY -CAN cross orders (buy an options contract at market and sell equivalent contract at market. if it first requests bids and offers from trading crowd |
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What is the increment a Floor Broker can bid at?
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$.05 ABOVE Highest Bid, or $.05 BELOW lowest offer
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Who are MARKET MAKERS and what do they do?
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Market makers are individuals that trade for thier own account in a security which they've registered.
-do not trade with public -only trade with floor brokers *not allowed to act as floor broker in same security |
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what is the minimum quote size for Market makers and where does their profit lie?
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Min quote size = 10 contracts;
profit is the spread btw bid and ask |
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What are ROTs?
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Registered Options Traders, that are market makers on exchanges OTHER THAN CBOE
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What happens if a Floor broker receives a order but it can not be executed at current market price?
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Order will then be given to OBO (order book official)
-OBO is an exchange employee who assists Board Broker in handling trades -works on a salary basis -accept limit orders -accept market orders BEFORE opening *-NOT ACCEPT: "stop orders", "stop limit orders" or spread or straddle orders |
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What is a DPM and what do they do?
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DPM = Designated Primary Market Maker
-similar to DMM -appointed by CBOE for given classes of options and acts -as market maker, floor broker and order book official **Unlike DMM, THERE ARE COMPETING OPTIONS MARKET MAKERS ON THE FLOOR** |
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Order Priority
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-public orders have priority if all entries are at same price
-Bids and asks displayed by Board Broker or Order Book Official take priority (as they show public orders) |
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Describe how a Trading Rotation Works
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- a trading rotation must occur before market is open to trading all series
-for each stock there may be 2030 option series (each series has different expiration and strike price) -to open allseries in orderly manner, Board Broker or OBO conducts Opening rotation, calling for bids and offeres for each series to establish opening price -after all series have gone through rotation, market is open to trade all series |
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"P" symbolizes which exchange?
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Pacific Exchange (ArcaEx)
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"B" symbolizes which exchange?
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Boston stock exchange
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"M" symbolizes which exchange?
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Midwest (Chicago) Exchange
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"C" symbolizes which exchange?
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Cincinnati Exchange
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"T" symbolizes which exchange?
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NADAQ
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"O" symbolizes which exchange?
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Instinet
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