Equity Options

Underlying issues

Shares of eligible stock, subject to criteria of eligibility set by the Canadian Derivatives Clearing Corporation.

Criteria of eligibility

Underlying interest must meet stringent eligibility requirements, including sufficient liquidity and market capitalization.

Trading unit

1 contract = 100 shares (may be adjusted for stock splits, distributions, etc.)

Expiry cycle

Regular cycle: two nearest months plus two quarterly months as defined in the expiry cycle.

Annual expiry of January for terms of one year or more (long-term options).

Last trading day

The 3rd Friday of the contract month, providing it be a business day; if not, the 1st business day.

Expiration day

The Saturday following the last trading day of the contract month.

Contract type

American style.

Minimum price fluctuation

• Minimum fluctuations of C$0.01 for option price lower than C$0.10
• Minimum fluctuations of C$0.05 for option price equal or higher than C$0.10

The premium per contract is obtained by multiplying the quote by 100 (ex.: quote of C$2.75 × 100 = C$275).

Since July 27, 2007, certain options classes are subject to new minimum quotation spreads. For more information on penny trading, refer to circular 031-13.

Reporting limit

250 option contracts.

Position limits

Information on position limits can be obtained from the Exchange as they are subject to periodic changes. See Circulars.

Price limit

A trading halt will be invoked in conjunction with the triggering of "circuit breakers" in the underlying.

Strike prices

5 strike prices bracketing the current underlying market price.

Settlement date

Premium and margin have to be settled the next business day following the transaction.

Exercise

Via the Canadian Derivatives Clearing Corporation (CDCC)

Delivery

Via the CDS Clearing and Depository Services Inc., on the 3rd business day following the exercise date.

Trading hours (Montréal time)

9:30* a.m. to 4:00 p.m.

* The regular session of the equity option market will open at 9:30 a.m. Each option class will then open for trading when a trade occurs on its underlying security on a recognized Canadian exchange. If no such trade has yet occurred, the option class will open for trading at 9:35 a.m.

Clearing corporation

Canadian Derivatives Clearing Corporation (CDCC)

Trading procedures

• Procedures applicable to the execution of cross transactions and the execution of prearranged transactions
• Procedures applicable to the execution of strategies involving options
• Procedures for the cancellation or adjustment of trades

Trading strategies

• Buying calls instead of buying stocks
• Buying calls as protection for future purchases
• Buying calls to hedge a short sale (protective calls)
• Writing covered calls
• Buying puts instead of short selling stocks
• Buying puts as an insurance policy (protective puts)
• Writing secured puts
• Writing covered straddles
• Long straddle
• Bear call spread (credit call spread or vertical spread)
• Bull call spread (debit call spread or vertical spread)
• Bear put spread (debit put spread or vertical spread)
• Bull put spread (credit put spread or vertical spread)
• Repair strategy
• Collar