Articles and Updates

In December, OIC instructor Mark Benzaquen led two webinars on fundamental concepts in options trading: exploring Understanding Options Exercise & Assignment: Features and Critical Aspects and Corporate Actions and Options: Navigating Potential Contract Adjustments. Both sessions provided practical knowledge essential for managing risk, understanding contractual obligations, and navigating complex market events that can significantly affect option positions.  What We Covered: Exercise and Assignment: Understanding Rights and Obligations   Exercise: The process by which an options buyer enacts their contractual rights.  Assignment: The seller's fulfillment of their contractual obligations.  Style Differences: American-style options can be exercised anytime on or before expiration, while European-style options can only be exercised at expiration.  After-Hours Movements and Proactive Management   After-hours market activity can turn out-of-the-money options in-the-money (or vice versa), creating unexpected exposure. Understanding brokerage policies on manual exercise procedures and cut-off times is essential.   Corporate Actions Require Case-by-Case Adjustments  Corporate events — mergers, stock splits, dividends, and bankruptcies — can alter option contract terms including strike prices, underlying assets, quantities, and expiration dates. These adjustments follow OCC By-Laws and SEC rules and are handled on a case-by-case basis.   Key considerations include:  Non-ordinary dividends typically are adjusted by either lowering strike prices by the dividend amount or by including the dividend amount to the deliverable  Bankruptcy can render call options worthless and put options at full value  Trading halts don't eliminate rights/obligations but may impact position management  Keep Learning:      Key Moments from Understanding Options Exercise & Assignment: Features and Critical Aspects  Key Moments from Corporate Actions and Options: Navigating Potential Contract Adjustments.  Meet OIC instructor Mark Benzaquen Mark, OIC instructor and Principal, Investor Education at OCC, brings 20+ years of experience with options in the Financial Services industry. Mark began his career in options with Stafford Trading, LLC in 1997 before transitioning to brokerage operations with MF Global in 2000. For more than a decade, Mark was the Lead Broker for his firm in the NDX/RUT trading pit, gaining special insight into customer order flow and trade execution.

OIC instructor Roma Colwell was joined by Jose Terrazas, Senior Associate, Market Risk & Default Management, OCC, on a visit to Roosevelt University to engage students from the finance club in a discussion about how the listed options market operates

Ever wonder how options ‘end-of-day marks’ are determined? Behind those ‘closing mark’ prices lies a precise, system-wide process known as mark-to-market, a cornerstone of how OCC safeguards market integrity each day. But before we examine what it is, let’s clarify what it’s not. It is not the bid price, the offer price, the midpoint, nor the last sale price. Most significantly, it is not a tradable value; actual transactions occur within the bid-ask spread throughout market hours.  What is the Mark-to-Market Process? The term "mark price" originates from a reporting process known as "mark-to-market." In the context of options, OCC computes these EOD marks using a proprietary 29-point binomial algorithm derived from the Cox-Ross-Rubinstein model. The algorithm takes into account factors such as closing bid/ask markets, implied volatility levels and several others. The objective is to reflect a fair and consistent measure of each contract’s current value for margin and risk purposes. This critical process helps clearing members maintain adequate collateral when calculating open positions’ daily P&L, margin requirements, and portfolio valuation.  Through this daily mark-to-market process, OCC fulfills its role as a central counterparty and as a Systemically Important Financial Market Utility (SIFMU), ensuring the U.S. options market operates with integrity, transparency, and minimal systemic risk. By providing these risk management services, OCC furthers its mission to promote market stability and integrity. What is OCC's Daily Process? The Mark-to-Market Process Flow

In November, OIC hosted two webinars, Navigating ETFs & Indices: Trading Vehicles for Broad Market Exposure led by OIC instructors Ken Keating and Mark Benzaquen and the other Cash-Settled Options Explained: Mechanics and Strategic Applications led by OIC instructor Roma Colwell.   These sessions explored index and ETF options, volatility products, and cash settlement mechanics. Both sessions provided practical, foundational knowledge needed to navigate these products, clarifying structural differences that potentially have major implications for risk, assignment, and trading outcomes. They explained how end-of-day values ensure a fair and orderly market and how cash-settled index options reduce the risk of unwanted assignment or losing shares through exercise.  What We Covered: Structural Differences Between Index Options and Equity/ ETF Options Matter  Settlement: Index options settle in cash, while equity/ETF options typically settle physically.  Exercise Style: Index options are commonly European-style (exercise only at expiration), while equity/ETF options are American-style (exercise anytime).  Timing: Some index contracts have AM settlement, while all ETF options follow PM settlement.  Deliverables: Index options have no shares delivered—only a cash transfer.  Cash Settlement Preserves the Underlying Portfolio  At expiration, the intrinsic value—if any—is simply transferred as cash (settling T+1). This makes broad-based index options particularly appealing for:  Hedging diversified portfolios  Managing index-level exposure  Avoiding the operational complexities of physical delivery  End-of-Day Values Are Calculated, Not Traded  OCC determines the end-of-day theoretical price for all options using a smoothing algorithm, rather than relying on the last trade. These closing marks serve as the basis for:  Daily P&L  Margin requirements  Risk monitoring.  Keep Learning:      Key Moments from Navigating ETFs & Indices: Trading Vehicles for Broad Market Exposure  Key Moments from Cash-Settled Options Explained: Mechanics and Strategic Applications  Meet OIC instructor Roma Colwell:   Roma Colwell Roma Colwell is an Associate Principal, Investor Education at OCC and is an instructor for The Options Industry Council (OIC). Roma has more than 27 years in the securities industry, 18 of which were spent as a floor broker, market maker, specialist and risk manager in both San Francisco and Chicago.

At the Benzinga Fintech Day & Awards 2025, leaders across trading, technology, and financial innovation gathered to explore the forces shaping today's markets.

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