Prior to buying or selling an option, investors should read Characteristics and Risks of Standardized Options, also known as the options disclosure document (ODD). It explains the characteristics and risks of exchange traded options. Brokers are required to provide investors with the document prior to investing in options. A copy of the document can also be obtained from any exchange on which options are traded or The Options Clearing Corporation (OCC)®.
Through the programs and services of The Options Industry Council (OIC)SM, OCC has created an ODD Quick Guide to support your understanding of disclosures for option investors. The resource is designed to help you navigate the disclosure document, explore the topics covered and understand the options terminology used throughout. The guide emphasizes stock (also known as equity) options and index options.
Sample topics covered within the guide:
- What is an option?
- What is a stock (equity) option?
- How do I exercise my option?
- What kind of adjustments might happen to my stock option?
- Major risks for option holders and writers
- General information about the options market
This guide is an educational resource and is not a substitute for the ODD.