Whole Section

  • 4.3 Rules Applicable to Option Contracts

    • 4.3.1 Types of Option Contracts

      Option Contracts may be:

      (a) call options or put options; and
      (b) deliverable or cash settled.
    • 4.3.2 Cash Settled Call Option Contract

      In the case of a cash settled call Option Contract:

      (a) the Buyer (taker) of the Option Contract acquires the right to receive an amount equivalent to the difference between the exercise price of the Option Contract and the settlement price in consideration for a contract premium, if the settlement price is higher than the exercise price; and
      (b) in the event that the Buyer of the Option Contract exercises that right, a Seller (grantor) as appointed by the Clearing House in accordance with the Clearing Rules assumes the obligation to pay the amount referred to in Rule 4.3.2(a) to the Buyer.
    • 4.3.3 Cash Settled Put Option Contract

      In the case of a cash settled put Option Contract:

      (a) the Buyer (taker) of the Option Contract acquires the right to receive an amount equivalent to the difference between the exercise price of the Option Contract and the settlement price in consideration for a contract premium, if the settlement price is lower than the exercise price; and
      (b) in the event that the Buyer of the Option Contract exercises that right, a Seller (grantor) as appointed by the Clearing House in accordance with the Clearing Rules assumes the obligation to pay the amount referred to in Rule 4.3.3(a) to the Buyer.
    • 4.3.4 Deliverable Call Option Contract

      In the case of a deliverable call Option Contract:

      (a) the Buyer (taker) of the Option Contract acquires the right to a long futures position in the underlying Futures Contract specified in the contract unit in the relevant Contract Specifications in consideration for a contract premium;
      (b) in the event that the Buyer of the Option Contract exercises that right, a Seller (grantor) as appointed by the Clearing House in accordance with the Clearing Rules shall be vested with a short futures position in the underlying Futures Contract at the same price and in the same settlement month as that assumed by the Buyer of the Option Contract; and
      (c) the Buyer acquires the right to a long futures position at an exercise price agreed between the parties, provided that it is selected from a list of such prices determined under the relevant Contract Specifications.
    • 4.3.5 Deliverable Put Option Contract

      In the case of a deliverable put Option Contract:

      (a) the Buyer (taker) of the Option Contract acquires the right to a short futures position in the underlying Futures Contract specified in the contract unit in the relevant Contract Specifications in consideration for a contract premium;
      (b) in the event that the Buyer of the Option Contract exercises that right, a Seller (grantor) as appointed by the Clearing House in accordance with the Clearing Rules shall be vested with a long futures position in the underlying Futures Contract at the same price and in the same settlement month as that assumed by the Buyer of the Option Contract; and
      (c) the Buyer acquires the right to a short futures position at an exercise price agreed between the parties, provided that it is selected from a list of such prices determined under the relevant Contract Specifications.
    • 4.3.6 American Style and European Style

      The Contract Specifications shall indicate whether an Option Contract is an American Style Option or a European Style Option. An "American Style Option" is an Option Contract that can be exercised at any time before its expiry. A "European Style Option" is an Option Contract that can only be exercised at expiry. This Rules applies to both American Style Options and European Style Options.

    • 4.3.7 Cash Settled Option Contracts which are in-the-Money

      A cash settled Option Contract is in-the-money if the settlement price lies above the exercise price in the case of a call Option Contract, or below the exercise price in the case of a put Option Contract.

    • 4.3.8 Exercise/Expiry of All Option Contracts on Expiration Day

      On the Expiration Day of both cash settled and deliverable Option Contracts, the Clearing House shall, unless otherwise directed by the holder of the Option Contract or otherwise stated in the relevant Contract Specifications:

      (a) exercise all in-the-money Option Contracts; and
      (b) allow all other Option Contracts to expire.

      Amended on 16 July 201216 July 2012.