Product-Specific Disclosures: Options Communications

Options have their own communication rules because of the unique risk profile and the critical role of the Options Disclosure Document (ODD). The timing of ODD delivery creates two distinct regulatory regimes: stricter rules before delivery, and standard rules after.

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.

Communications Before ODD Delivery (FINRA Rule 2220)

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

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)

Permitted Content

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

Prohibited Content

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.

Communications After ODD Delivery

Once the ODD has been delivered, options communications follow the standard content rules of FINRA Rule 2210:

• Must be fair and balanced regarding risks and rewards
• Subject to the general content standards (no misleading statements, no performance guarantees)
• Governed by FINRA Rules 2220 and 2360

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.