8.6 Options Account Rules & OCC Assignment
FINRA and OCC impose strict supervisory controls on options accounts due to leverage risk. The procedural sequence for account opening and assignment allocation is tested regularly.
Key FINRA Exam Takeaways
- Account Opening Order: 1. Deliver ODD (Options Disclosure Document) at or before account approval; 2. Registered Options Principal (ROP) approval; 3. Initial trade permitted; 4. Client signs and returns Options Agreement within 15 calendar days.
- If the Options Agreement is NOT returned within 15 days, client is restricted to CLOSING TRANSACTIONS ONLY.
- OCC Assignment: OCC assigns exercise notices to clearing broker-dealers on a RANDOM basis.
- Broker-Dealer Allocation: The BD can allocate assignments to clients using RANDOM, FIFO (First-In, First-Out), or another fair method.
- Options taxation: Capital gains/losses are short-term unless the option is LEAPS held >1 year.
The 15-Day Rule for Options Agreements
A customer may trade options immediately after ROP account approval. However, if the signed options agreement is not received within 15 calendar days, no new opening positions can be created; only closing existing contracts is permitted.
Knowledge Checkpoint • Section 8.6
A new client is approved for options trading on Monday, October 1. If the broker-dealer has not received the signed Options Agreement by October 16 (15 calendar days later), what trading restriction must be placed on the account?