Options Communications

The ODD delivery moment is the dividing line for nearly every rule in this unit, so anchor each fact to whether it applies before or after that moment.

What Is the Options Disclosure Document (ODD)?

The ODD is the required disclosure document for options trading:

• Must be delivered to customers at or before the time the account is approved for options trading
• Describes the characteristics and risks of standardized options
• Published by the Options Clearing Corporation (OCC)
• A hyperlink to the ODD satisfies the delivery requirement (electronic delivery is acceptable)

When the OCC issues ODD supplements (updates), firms must distribute the supplement to customers who previously received the ODD, no later than the time the customer receives a confirmation of a transaction in the relevant options category.

Exam Tip: Gotchas

• The ODD must be delivered at or before account approval for options trading, not at the time of the first trade. The trigger is account approval, not the first transaction.
• A hyperlink to the ODD counts as delivery. Electronic delivery satisfies the requirement.

What Rules Apply Before ODD Delivery?

Retail communications about standardized options used prior to ODD delivery face much stricter requirements:

What Is the Filing Requirement?

• Must be filed with FINRA at least 10 calendar days before use for approval
• This is a pre-use filing requirement (similar to new member retail communications)
• Must also be approved in advance by a Registered Options Principal (ROP); this approval applies to all retail options communications except completed worksheets

What Content Is Permitted?

Pre-ODD communications are restricted to:

• General descriptions of options
• Brief descriptions of exchanges and clearing agencies
• Contact information for obtaining a copy of the ODD; if that contact information is an internet address, it must be accompanied by a telephone number or mailing address

What Content Is Prohibited?

Pre-ODD communications must NOT contain:

• Recommendations of any kind
• Past or projected performance figures (including annualized rates of return)
• Names of specific securities

Exam Tip: Gotchas

• Pre-ODD filing is 10 calendar days (not business days) before use. This is easy to confuse with new-member filings, which require 10 business days.

What Rules Apply After ODD Delivery?

Once the ODD has been delivered, options communications follow the standard content rules of the communications-with-the-public rule:

• Must be fair and balanced regarding risks and rewards
• Subject to the general content standards (no misleading statements, no performance guarantees)
• Governed by the options-communications and options-trading rules
• Must state that options are not suitable for all investors, and that supporting documentation for any claim, comparison, recommendation, statistic, or technical data will be supplied on request; neither statement is required in institutional communications
• Any claim of opportunity must be paired with a risk statement of equal specificity
• A projection is permitted only when the ODD precedes or accompanies the communication, all assumptions and relevant costs are disclosed, the projection is plausible, and no certainty is suggested; an annualized return may not be based on less than a 60-day experience

Exam Tip: Gotchas

• Options communications used BEFORE ODD delivery have much stricter requirements than those used after. Pre-ODD materials cannot name specific securities, recommend trades, or show performance. The exam frequently tests this before/after distinction.

What Should You Check on Exam Day?

• Identify whether the ODD was delivered before applying pre- or post-delivery content rules.
• Use account approval, not the first trade, as the ODD delivery trigger.
• Apply the 10-calendar-day (not business-day) filing window to pre-ODD retail communications.
• Confirm a pre-ODD communication contains no recommendations, performance figures, or named securities.
• If pre-ODD contact information is an internet address, confirm it also lists a phone number or mailing address.
• Confirm a retail options communication has Registered Options Principal approval, unless it is a completed order ticket.
• Check that a post-ODD opportunity claim carries an equally specific risk statement, and that any annualized return rests on at least 60 days of experience.