Options trading markets

Options trading markets
PREPARED BY: WALID SAAFAN
Financial Derivatives - Assignment 1
Arab Academy for Science and Technology
Under supervision of Dr. Ahmed Bahaa
5/9/2009
This document present an example of option trading market including its listing regulation and a sample terms for three
traded option contracts

Prepared by: Walid Saafan | CHICAGO BOARD OPTIONS EXCHANGE CBOE 2
CHICAGO BOARD OPTIONS EXCHANGE CBOE
On April 26, 1973, the CBOE pioneered the concept of standardized, listed stock options to be traded on a centralized,
regulated marketplace. Listing call options on just 16 stocks, CBOE traded 911 contracts on that first day of business. In
1977, put options were introduced.
The CBOE's 45,000 square-foot trading floor opened for trading in February of 1984. The exchange is cabled with more
than 50,000 miles of electrical wire, most of it beneath the trading floor. There is enough phone cable to serve a city of
200,000 people; and more information display screens under one roof than any other building in the world. The
concentration of technology requires as much electricity as the nearby 110-story Sears Tower.
The Options Clearing Corporation is the sole issuer of all securities options listed at the CBOE, four other U.S. stock
exchanges and the National Association of Securities Dealers, Inc. (NASD), and is the entity through which all CBOE
option transactions are ultimately cleared. As the issuer of all options, OCC essentially takes the opposite side of every
option traded. Because OCC basically becomes the buyer for every seller and the seller for every buyer, it allows options
traders to buy and sell in a secondary market without having to find the original opposite party.
The OCC substantially reduces the credit risk aspect of trading securities options as the OCC requires that every buyer
and every seller have a clearing member and that both sides of the transaction are matched. It also has the authority to
make margin calls on firms during the trading day. The OCC has a AAA credit rating from Standard & Poor's Corporation.
Listing requirements
Among the requirements a company must satisfy is “distribution”. There must be a certain number of outstanding
shares, and the shares must be owned by a minimum number of people. Otherwise, ownership of the stock is deemed
“too highly concentrated”. The NYSE and NASDAQ also have listing requirements.
The contract size of an option refers to the amount of the underlying asset covered by the options contract. For each
unadjusted equity call or put option, 100 shares of stock will change hands when one contract is exercised by its owner.
These 100 shares of underlying stock are also referred to as the contract's "unit of trade."
The contract size of a cash-settled index option is determined by its multiplier. The multiplier determines the aggregate
value of each point of the difference between the exercise price of the option and the exercise settlement value of the
underlying interest. For example, a multiplier of 100 means that for each point by which a cash-settled option is in the
money upon exercise, there is a $100 increase in the cash settlement amount.

Prepared by: Walid Saafan | South African Future Exchange SAFex 3
South African Future Exchange SAFex
Listing requirements
Listing of new foreign referenced commodity derivatives will be done on request from the market.
However, these securities must comply with the requirements prescribed by the JSE. The
requirements include-
the underlying security must be an internationally listed instrument;
a committed Liquidity Provider; and
the availability of a reference price on day of listing and prices thereafter.
Trading calendar
JSE MARKETS CALENDAR 2009
Month Week Mon Tues Wed Thurs Fri Sat Sun
Dec/Jan 53 29 30 31 1 2 3 4
Jan 1 5 6 7 8 9 10 11
Jan 2 12 13 14 15 16 17 18
Jan 3 19 20 21 22 23 24 25
Jan/Feb 4 26 27 28 29 30 31 1
Feb 5 2 3 4 5 6 7 8
Feb 6 9 10 11 12 13 14 15
Feb 7 16 17 18 19 20 21 22
Feb/Mar 8 23 24 25 26 27 28 1
Mar 9 2 3 4 5 6 7 8
Mar 10 9 10 11 12 13 14 15
Mar 11 16 17 18 19 20 21 22
Mar 12 23 24 25 26 27 28 29
Mar/Apr 13 30 31 1 2 3 4 5
Apr 14 6 7 8 9 10 11 12
Apr 15 13 14 15 16 17 18 19
Apr 16 20 21 22 23 24 25 26
Apr/May 17 27 28 29 30 1 2 3
May 18 4 5 6 7 8 9 10
May 19 11 12 13 14 15 16 17
May 20 18 19 20 21 22 23 24
May 21 25 26 27 28 29 30 31
June 22 1 2 3 4 5 6 7
June 23 8 9 10 11 12 13 14
June 24 15 16 17 18 19 20 21
June 25 22 23 24 25 26 27 28
June/July 26 29 30 1 2 3 4 5
July 27 6 7 8 9 10 11 12
July 28 13 14 15 16 17 18 19
July 29 20 21 22 23 24 25 26
July/Aug 30 27 28 29 30 31 1 2
Aug 31 3 4 5 6 7 8 9
Aug 32 10 11 12 13 14 15 16
Aug 33 17 18 19 20 21 22 23
Aug 34 24 25 26 27 28 29 30
Aug/Sept 35 31 1 2 3 4 5 6
Sept 36 7 8 9 10 11 12 13

Prepared by: Walid Saafan | South African Future Exchange SAFex 4
Sept 37 14 15 16 17 18 19 20
Sept 38 21 22 23 24 25 26 27
Sep/Oct 39 28 29 30 1 2 3 4
Oct 40 5 6 7 8 9 10 11
Oct 41 12 13 14 15 16 17 18
Oct 42 19 20 21 22 23 24 25
Oct/Nov 43 26 27 28 29 30 31 1
Nov 44 2 3 4 5 6 7 8
Nov 45 9 10 11 12 13 14 15
Nov 46 16 17 18 19 20 21 22
Nov 47 23 24 25 26 27 28 29
Nov/Dec 48 30 1 2 3 4 5 6
Dec 49 7 8 9 10 11 12 13
Dec 50 14 15 16 17 18 19 20
Dec 51 21 22 23 24 25 26 27
Dec/Jan 52 28 29 30 31 1 2 3
Public
Holidays
Equity
Derivative
Close Out
BDA
Month-
end
SWIFT
Cut-over
dates
Bond
Futures
Close
Out
APD
Last
Trading
Day
Currency
Future
and
Single
Stock
Option
Expiry
Dates

Prepared by: Walid Saafan | NYSE Euronext 5
NYSE Euronext
Euronext is a regulated market. Companies listed on Euronext are only subject to a number of rules decreed by the EU
and applicable to all regulated markets within the EU. This harmonised environment, particularly in terms of financial
reporting and accounting standards, provides direct access to a very large base of investors.
For greater clarity, Euronext is segmented according to market capitalisation:
• Compartment A: companies with a market capitalization of more than €1 billion;
• Compartment B: companies valued between €150 million and €1 billion;
• Compartment C: companies with a market capitalization of less than €150 million.
Regulations
The Regulation section gathers the rules issued by Euronext as market operator to frame the organisation of the
European markets of NYSE Euronext. There are two types of regulated markets organised by Euronext:
The Securities Markets (markets of stocks, bonds, warrants, trackers, structured funds, certificates), also known as the
Cash markets, organised in Amsterdam, Brussels, Lisbon and Paris
The Derivatives Markets (markets of options, futures, swaps,…) also known as the Liffe Markets, organised in
Amsterdam, Brussels, Lisbon, London and Paris.

While the majority of the rules are harmonized and therefore applicable in all the locations (Amsterdam, Brussels,
Lisbon, London and Paris), some are still non harmonized and therefore different from one location to another.
The Euronext rules provided in this section are without prejudice to the provisions of the EU regulations and the
relevant National regulations (Belgian, French, Dutch, Portuguese and UK) applicable to the Euronext Market
Undertaking organising such markets and to the companies listed on these markets and the members active on those
ones.
Notices/Instructions implement the provisions of the Rule Books.
Euronext Cash regulation
This subsection gathers the Euronext rules applicable to the Euronext Cash/Securities Markets. While some rules are
harmonized and applicable in all the locations, others are only applicable in the location concerned. The rules contained
in the Rule Book I are harmonized and thus applicable in all the cash market places (Amsterdam, Brussels, Lisbon and
Paris). The Rule Book II contains rules that have not been harmonized in all the locations and therefore are different in
each market place.
The Rule Books (I and II) and the Notices/Instructions are applicable to the Regulated Markets.
The Trading Manual gathers the rules applicable to the trading in the Euronext Cash/Securities Markets.
The rules applicable to Multilateral Trading Facilities (MTF) in the meaning of the MiFID (Market in Financial Instruments
Directive) are presented under the form of Organisational notas for each MTF. The rules of the MTF may refer to rules
applicable to the Regulated markets.
Euronext Derivatives regulation
This subsection gathers the Euronext rules applicable to the Derivatives markets. These markets are Regulated Markets
in the meaning of the MiFID (Market in Financial Instruments Directive).
While some rules applicable to those markets are harmonized, others are applicable only in the location concerned. The
rules contained in the Rule Book I are harmonized and thus applicable in all the derivatives market places (Amsterdam,
Brussels, Lisbon, London and Paris). The Rule Book II contains rules that have not been harmonized in all the locations
and therefore exist in Amsterdam, Brussels, Lisbon, London and Paris.
The Trading Procedures gathers the rules applicable to the trading in the Derivatives markets for both all the locations
and for each location.
http://www.euronext.com/tools/documentation/wide/documents-2958-EN.html

Main contracts by volume
Main contracts by volume
08/05/09
Name Market Code Vol. O.I.
ING GROEP AMS ING 132,358 3,867,311
AEGON AMS AGN 102,094 2,293,628
FORTIS AMS FOR 78,262 2,307,150
KON. PHILIPS ELECTRONICS AMS PHI 46,862 1,252,135
ROYAL DUTCH SHELL A AMS RD 40,457 2,329,032
AXA PAR CS1 39,912 1,309,935
ARCELOR MITTAL AMS MT 35,958 541,310
UNILEVER AMS UN 26,036 1,379,910
KON. AHOLD AMS AH 22,879 856,005
KON. KPN AMS KPN 15,588 1,582,740
Vol - (Volume) is the number of contracts traded in the most recent transaction.
Day's Volume - Number of trades that have taken place so far in the trading day. This figure updates as the day progresses and more trades take place.
%+/- Percentage price of last trade compared to yesterday's settlement price.
Settl - The previous day's settlement price.
O.I. - (Open Interest) is the outstanding long and short positions of the previous trading day updated in the morning each day

Product information
Codes and classification
Mnemo ING Market Liffe Amsterdam Vol. 93,688 06/05/09
Exercise type American Currency € O.I. 3,794,357
Underlying ING GROEP ISIN NL0000303600 Market Euronext Amsterdam
Currency € Last 7.72 06/05/09 17:36 Last change % 0.52
Volume 24,280,468.00 Best bid 7.72 06/05/09 17:38 Best ask 7.725 06/05/09 17:38
Dutch Stock Options
Contract size 100 shares
Expiry months 1,2,3 monthly; 3,6,9,12 quarterly (March, June, September, December); 18 half yearly (June, December) and 12, 24, 36, 48, 60 yearly (December).
See ‘Related documentation’ below to find out which expiry months are listed per stock.
Quotation Euros per share
Minimum price
movement
(tick size and value)
€0.05 / €5
Exercise day Exercise by 19.15 Amsterdam time on any business day, extended to 19.45 Amsterdam time on the Last Trading Day
Last trading day Until 17.30 Amsterdam time on the third Friday of the expiry month, provided this is a business day. If not, the last day of trading is the last business
day preceding the third Friday in the expiry month.
Settlement Delivery of 100 shares through the settlement system of LCH.Clearnet SA.
Trading hours 9.01 - 17.30 Amsterdam time
Exercise American
Related
documentation
O classes (23/06/08)
Expiry months listed per contract (04/07/08)
Last update 25/04/08

Mnemo AGN Market Liffe Amsterdam Vol. 41,160 05/05/09
Underlying AEGON ISIN NL0000303709 Market Euronext Amsterdam
Dutch Stock Options
Minimum price
movement
€0.05 / €5
Exercise American
Related
documentation

Mnemo FOR Market Liffe Amsterdam Vol. 9,810 06/05/09
Underlying FORTIS ISIN BE0003801181 Market Euronext Brussels
Dutch Stock Options
Minimum price
movement
€0.05 / €5
Exercise American
Related
documentation

Prepared by: Walid Saafan | 13

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