CHAPTER I INTRODUCTION This booklet relates solely to options Issued by The Options Clearing Corporation ("OCC"). and all refer- ences to "options- in this booklet are applicable only to such options. As of the date of this booklet, options are traded on the United States markets listed on the inside front cover page and on the European Options Exchange in Amsterdam, The Netherlands. In the fu- ture, options may be traded on other markets within or outside the United States. The markets on which op- tions are traded at any given time are referred to in this booklet as the "options markets." OCC is a registered clearing agency, and each U.S. options market is a national securities exchange, that is subject to regulation by the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934. Foreign options markets. and their mem- bers, are not generally subject to regulation by the SEC or to the requirements of the securities or other laws of the U.S. and may not be subject to the jurisdic- tion of U.S. courts. What is an option? An option is the right either to buy or to sell a specified amount or value of a particular underlying interest at a fixed exercise price by exercis- ing the option before its specified expiration date. An option which gives a right to buy is a call option, and an option which gives a right to sell is a p option. Calls and puts are distinct types of options, and the buying or selling of one type does not involve the other. EXAMPLE: An option to st 100 shares of com- mon stock of the XYZ Corporation at a specified exer- cise price would be an XYZ call option. An option to sell 100 shares of common stock of the XYZ Corpora- tion at a specified exercise price would be an XYZ 24 option. There are two different kinds of options—physical delivery options and cash-settled options. A physical delivery option gives its owner the right to receive physical delivery (if it is a call), or to make physic