Exercise and Assignment

What this video covers

• The difference between American-style exercise on any business day prior to and on expiration, and European-style exercise only on expiration, subject to the Cboe exercise rule and Clearing Corporation Rules
• How an exercise notice moves from the holder to the Options Clearing Corporation, then to a clearing member, and finally to a firm's customers' short positions
• Why a Trading Permit Holder organization must establish fixed allocation procedures in advance instead of deciding case by case
• The permitted allocation methods: first in, first out, Exchange-approved automated random selection, and Exchange-specified manual random selection
• Why last in, first out (LIFO) is not a permitted general allocation basis, and how binary options and credit default options are treated under the allocation rule
• The firm's customer disclosure, prior Exchange approval, change approval, self-regulatory organization (SRO) exception, and three-year record retention obligations
• The distinction between exercise and transaction restrictions, non-index and index option protections near expiration, and the halt, 4:20 p.m., resumption, and flex option traps