Series 7 practice questionmediumTrade Settlement — Options
What is the regular way settlement period for options contracts traded on an exchange?
- AT+1 (next business day)✓ Correct answer
- BT+0 (same day)
- CT+2 (two business days)
- DT+3 (three business days)
Explanation
Why A — T+1 (next business day)
Exchange-traded options contracts settle on a T+1 basis under regular way settlement. This means the buyer must pay the premium and the seller must deposit the required margin by the next business day following the trade. Note that options exercise and assignment follow different timelines: when an option is exercised, the resulting stock transaction settles according to the settlement rules for the underlying security.
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