Quick Answer
Cboe recognizes two order types, limit and market; stop and all-or-none are Order Instructions, and immediate-or-cancel is a Time-in-Force. Absent an exemption, a firm may not make an opening transaction it has reason to believe would breach a position limit, and exercise limits cap long positions exercised within any five consecutive business days.
The unit moves from order vocabulary to expiration to position and exercise ceilings.
Which One-Liners Win Points?
- Only two order types exist. Stop, stop-limit, reserve and all-or-none are Order Instructions; a triggered stop becomes a market order and a stop-limit a limit order.
- The System treats a Fill-or-Kill order as All-or-None, and disregards an All-or-None instruction on a one-contract order.
- Unmarked means the default: Price Adjust unless Cancel Back, Non-Attributable unless Attributable, and a Floor Broker order is not held unless marked "held" or routed electronically on the User's instruction.
- Immediate-or-Cancel and Limit-on-Close are limit orders; Market-on-Close is a market order. The System cancels either closing order unexecuted by the regular-hours close.
- American-style options are exercisable on any business day through expiration, European-style only on the expiration date, each subject to exercise restrictions.
- A firm allocates assigned exercise notices by fixed procedures: first in, first out, automated random selection the Exchange approved, or manual random selection the Exchange specified, explained to customers in writing.
- Only the clearing member carrying the contract with the clearing corporation may tender an exercise notice.
- At expiration, a contract in the money by $0.01 or more is deemed tendered unless the clearing member instructs the clearing corporation otherwise before the time it specifies.
How Do Position Limits and Exercise Limits Differ?
| Position limit | Exercise limit | |
|---|---|---|
| What it caps | Same-side aggregate position | Aggregate long positions exercised in a class |
| Measured | At a point in time | Across any five consecutive business days |
| Long calls and long puts | Opposite sides, not aggregated | Counted together |
| Index options | Set by index family; none for a named list | Nearest-expiration position limit |
- Same side of the market pairs long calls with short puts, and short calls with long puts; each pairing counts separately against the same number.
Which Numbers Matter Most?
| Item | Value |
|---|---|
| Equity position and exercise limits | 25,000, 50,000, 75,000, 200,000 or 250,000 contracts, by six-month volume and shares outstanding |
| Control presumed | Ownership of 10 percent or more; less does not preclude aggregation |
| General large-position report | 200 or more contracts of one class, same side, previous business day |
| Exercise advice cut-off, noncash-settled equity options | 3 hours 30 minutes after the announced close (electronic time stamp); 1 hour 30 minutes (non-customer, no time stamp) |
| Exercise Advice, American-style cash-settled index options | 4:20 p.m., or five minutes after the close if trading hours are extended or modified |
| Exercise restriction barred | Final 10 business days before expiration, except index options |
Which Gotchas Trip Students Up?
- The position limit binds the Trading Permit Holder, not the customer, and turns on what the firm had reason to believe.
- Index options can face an exercise restriction until the opening of business on the last business day before expiration.
- A volatility index option expires the day its settlement value is calculated, and its last trading day is the business day before.
- A late exercise instruction can be both effective and punished, and filing with the Exchange is not notice to the clearing corporation.
- "No position limit" is a named list, such as the S&P 500 Index, not a category.
One-Breath Recap
Cboe recognizes only two order types, limit and market; stop and all-or-none are Order Instructions, and immediate-or-cancel is a Time-in-Force. Subject to exercise restrictions, an American-style option may be exercised on any business day through expiration and a European-style option only on its expiration date. At expiration, a contract in the money by $0.01 or more is deemed tendered to the Options Clearing Corporation unless the clearing member instructs otherwise before the time the Corporation specifies. Absent an exemption, a firm may not make an opening transaction it has reason to believe would breach a position limit, and exercise limits cap long positions exercised in a class within any five consecutive business days.
Need more than the recap? Read the full Options Trading unit.