certain cash-settled options provide for automatic ex-
ercise in specified circumstances. Other options hav-
ing automatic exercise provisions may be introduced
for trading in the future.
The rules of the options markets generally limit the
total number of puts or calls on the same underlying
interest that a single investor or group of investors
acting in concert may exercise during a specified time
period. Information concerning the exercise limits for
particular options is available from the options market
on which those options are traded or from brokerage
firms.
The right to exercise an option may be restricted in
certain circumstances. This is discussed under "Risks
of Option Holders" in Chapter X.
When an option has been exercised. OCC will as-
sign the exercise in accordance with its rules to a
Clearing Member whose account with OCC reflects the
writing of an option of the same series. The Clearing
Member may, in turn, assign this exercise to one of its
customers who i8 a writer in accordance with the
Clearing Member's procedures, and the assigned
writer will then be obligated to perform the obligations
of the option—that is, to sell (in the case of a physical
delivery call) or buy (in the case of a physical delivery
put) the underlying interest at the exercise price, or, in
the case of a cash-settled option, to pay the cash set-
tlement amount. The assignment process is dis-
cussed further in Chapter VIII.
CASH SETTLEMENT AMOUNT, SETTLEMENT
CURRENCY and EXERCISE SETTLEMENT
VALUE-The cash settlement amount is the amount
of cash that the holder of a cash-settled option is enti-
tled to receive upon exercise. It is the amount by which
the exercise settlement value of the underlying interest
of a cash-settled call exceeds the exercise price, or the
amount by which the exercise price of a cash-settled
put exceeds the exercise settlement value of the un-
derlying interest, multiplied by the multiplier for the
option.
EXAMPLE: Assume that a holder of a cash-set-
tled call on the XYZ Index that has an exercise price of
80 exercises it when the exercise settlement value of
the index is 85. If the multiplier for XYZ index options is
100. the assigned writer would be obligated to pay,
9
CONFIDENTIAL - PURSUANT TOCRIESCIRPON0ST770
P. 6(e)
CONFIDENTIAL SDNY_GM_00183954
EFTA01353408