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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: YlangYlangBreeze who wrote (2217)	2/4/2000 9:30:00 PM
From: KFE	Read Replies (1) \| Respond to of 8096

YYB, I am not trading OEX, QQQ, or RUT options, but I would like if you would explain the different settlements nontheless Here is the condensed version: OEX: American style and cash settled. PM settlement QQQ: American style and settlement via the underlying RUT: European and cash settled. AM settlement American style: may be exercised at any time prior to expiration. European style: may only be exercised at expiration. Early assignment is not a possibility. Cash settlement: option exerciser receives cash and an assigned writer pays cash equal to the intrinsic value (in the money amount) times the index multiplier. PM settlement: All equity options(QQQ) and the OEX. Settlement price is based on the closing price of the underlying on the last trading day before expiration. AM settlement: RUT and other European index options. The last trading day is typically Thursday of expiration week. The settlement price is the Friday opening price of the underlying index. This value cannot be determined until opening prices for all stocks in an index have been established. Tax Treatment: All options on broad based indexes including RUT and OEX are considered section 1256 contracts. All trades in these options are 60% long term and 40% short term regardless of holding period and whether long or short. Use form 6781 to report these trades, which are then transferred to Schedule D. Any position in these options that is outstanding on Dec 31 gets marked to market and is considered sold/bought at the Dec31 closing price. The new cost basis will be the Dec 31 value for any closing transaction in the following year. Regards, Ken