Definition
The term Exchange of Options for Options describes some privately negotiated trade between the market of a futures contract position for an corresponding OTC option. Exchange of Currency Options for Options is just one of many Exchange for Related Positions (EFRP) trades.
Explanation
An Exchange of Options for Options (EOO) is just one of many Exchange to Related Positions (EFRP) trades authorized under Rule 538. An EOO requires the market of a futures contract position for the Over the Counter (OTC) option between the exact same underlying product. In order to run this trade:
- The buyer (seller) of this OTC option must likewise be the client (seller) of this futures contract.
- The total amount of this OTC option has to be roughly equivalent to the futures contract.
- The OTC option should have the exact underlying asset specified from the futures contract in addition to exactly the exact same contract .
As may be true with different varieties of EFRPs, the trade does occur because a privately organised exchange in places. The other licensed EFRP trades incorporate Exchange for Physical (EFP), Exchange for Risk (EFR) and Exchange for Swap (EFS).
