A cash-settled option gives its owner the right to receive a cash payment based on the difference between a determined value of the underlying interest at the time the option is exercised and the fixed exercise price of the option. Each options market selects the underlying interests on which options are traded on that market. Options on other types of underlying interests may become available in the future. Each U.S. options market publishes specification sheets setting forth the particular standardized terms of the options traded on that options market. Rather, subject to certain limitations, the parties to transactions in these options may designate certain of the terms.
Options having the same standardized terms are identical and comprise an options series.
The standardization of terms makes it more likely that there will be a secondary market in which holders and writers of options can close out their positions by offsetting sales and purchases. By selling an option of the same series as the one he bought, or buying an option of the same series as the one he wrote, an investor can close out his position in that option at any time there is a functioning secondary options market in options of that series. In some instances, options of the same series may be traded on more than one options market at the same time. Options that are so traded are called multiply-traded options. Options traded on a U.S. options market may also be traded on a foreign options market.