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Strategies & Market Trends : The Stock Market Bubble
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To: Kip518 who wrote (2571)1/18/1999 2:38:00 PM
From: Tommaso  Read Replies (1) of 3339
 
Well, I have now been studying the prospectus of the OCC (Options Clearing Corporation), and while there is no protection there comparable to the SIPC insurance for brokerage accounts, there are several levels of protection that require that margin (or securities) be deposited so as to insure the value of options.

But this comment on the whole operation does imply that rules can get bent in times of difficulty:

wallstreete.com

Here's the entire prospectus:

cboe.com

I do agree with you, however, that in a truly disastrous collapse there can be all kind of reneging. But suppose I was the one writing or selling a put option. I would have to maintain margin constantly with my broker that covered my liability of buying the stock.

But I do note a paragraph buried in the prospectus:

"OCC has no reason to believe that any depository holding margin deposits or deposits made in lieu of margin will not deliver them in accordance with the terms of its agreement with OCC, or that any bank will not honor letters of credit issued to OCC for margin purposes. However, there can be no assurance that a bank or other depository will not delay or default in performing these or other obligations to OCC, or be restrained by court order or regulatory action from performing these obligations, and such delays or defaults could adversely affect OCC's ability to perform its obligations as the issuer of Options."
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