When do settlements occur for options transactions after exercise?

When do settlements occur for options transactions after exercise?

• A. 1 business day after exercise date
• B. 2 business days after exercise date
• C. Next calendar day
• D. The same day of exercise

Answer: (A)

Settlements for options transactions after exercise occur one business day after the exercise date. This means that when an option is exercised, the transaction is processed, and the transfer of shares or cash takes place the following business day. This is important because it allows time for the clearing and settlement processes to be completed, ensuring that all relevant transactions are properly recorded and that the proper parties receive the correct assets or cash. While some may consider the immediate implications of exercising an option, the industry standard for settlements necessitates a full business day to account for the necessary steps involved in clearing and transferring ownership, which typically includes updating the records maintained by clearinghouses and brokerage firms.

Settlements for options transactions after exercise occur one business day after the exercise date. This means that when an option is exercised, the transaction is processed, and the transfer of shares or cash takes place the following business day.

This is important because it allows time for the clearing and settlement processes to be completed, ensuring that all relevant transactions are properly recorded and that the proper parties receive the correct assets or cash.

While some may consider the immediate implications of exercising an option, the industry standard for settlements necessitates a full business day to account for the necessary steps involved in clearing and transferring ownership, which typically includes updating the records maintained by clearinghouses and brokerage firms.