Template:Nutshell Equity Derivatives 3.4: Difference between revisions

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Section {{eqderivprov|3.4}}. '''{{eqderivprov|Automatic Exercise}}'''. If “'''{{eqderivprov|Automatic Exercise}}'''” is specified to be applicable to an {{eqderivprov|Option Transaction}}, then each {{eqderivprov|Option}} not previously exercised under that {{eqderivprov|Option Transaction}} will be deemed to be automatically exercised: <br>
{{eqderivprov|3.4}}. '''{{eqderivprov|Automatic Exercise}}'''. If “'''{{eqderivprov|Automatic Exercise}}'''” applies to an {{eqderivprov|Option Transaction}} then (unless, by the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}} {{eqderivprov|Buyer}} notifies {{eqderivprov|Seller}} that {{eqderivprov|Automatic Exercise}} should not occur) each unexercised {{eqderivprov|Option}} will be automatically exercised: <br>
:{{eqderivprov|3.4(a)}} where “'''{{eqderivprov|Cash Settlement}}'''” is applicable, at the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}} unless {{eqderivprov|Buyer}} notifies {{eqderivprov|Seller}} or, if applicable, {{eqderivprov|Seller’s Agent}} (by telephone or in writing) prior to the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}} that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply; and <br>
:{{eqderivprov|3.4(a)}} '''{{eqderivprov|Cash Settlement}}''': at the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}}; and <br>
:{{eqderivprov|3.4(b)}} where “'''{{eqderivprov|Physical Settlement}}'''” is applicable, at the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}} if at such time the {{eqderivprov|Option}} is In-the-Money, as determined by the {{eqderivprov|Calculation Agent}}, unless {{eqderivprov|Buyer}} notifies {{eqderivprov|Seller}} or, if applicable, {{eqderivprov|Seller’s Agent}} (by telephone or in writing) prior to the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}} that it does not wish {{eqderivprov|Automatic Exercise}} to occur, in which case {{eqderivprov|Automatic Exercise}} will not apply.
:{{eqderivprov|3.4(b)}} '''{{eqderivprov|Physical Settlement}}''': if the {{eqderivprov|Calculation Agent}} determines the {{eqderivprov|Option}} to be {{eqderivprov|In-the-Money}} at such time, as at the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}}.
:{{eqderivprov|3.4(c)}} “'''{{eqderivprov|In-the-Money}}'''” means  
:{{eqderivprov|3.4(c)}} “'''{{eqderivprov|In-the-Money}}'''” means:
::(i) in respect of a {{eqderivprov|Call}}, that (A) the Reference Price is equal to or greater than the price for a Share at which any {{eqderivprov|Related Exchange}} would automatically exercise a {{eqderivprov|Physically-settled}} option with the {{eqderivprov|Strike Price}} relating to such Share, or (B) if no options relating to such Share are listed on any {{eqderivprov|Related Exchange}} or no {{eqderivprov|Related Exchange}} is specified in the related {{eqderivprov|Confirmation}}, the Reference Price is greater than the {{eqderivprov|Strike Price}}; and  
::(i) '''For a {{eqderivprov|Call}}''': That the {{eqderivprov|Reference Price}} at least equals the price at which a {{eqderivprov|Related Exchange}} would automatically exercise a {{eqderivprov|Physically-settled}} option on that {{eqderivprov|Share}} with that {{eqderivprov|Strike Price}} or, if there are no listed options on that {{eqderivprov|Share}} or there is no {{eqderivprov|Related Exchange}}, the {{eqderivprov|Reference Price}} exceeds the {{eqderivprov|Strike Price}}; and  
::(ii) in respect of a {{eqderivprov|Put}}, that (A) the Reference Price is equal to or less than the price for a Share at which any {{eqderivprov|Related Exchange}} would automatically exercise a {{eqderivprov|Physically-settled}} option with the {{eqderivprov|Strike Price}} relating to such Share, or (B) if no options relating to such Share are listed on any {{eqderivprov|Related Exchange}} or no {{eqderivprov|Related Exchange}} is specified in the related {{eqderivprov|Confirmation}}, the Reference Price is less than the {{eqderivprov|Strike Price}}.
::(ii) '''For a {{eqderivprov|Put}}''': That the {{eqderivprov|Reference Price}} is no greater than the price at which a {{eqderivprov|Related Exchange}} would automatically exercise a {{eqderivprov|Physically-settled}} option on that {{eqderivprov|Share}} with that {{eqderivprov|Strike Price}} or, if there are no listed options on that {{eqderivprov|Share}}, or there is no {{eqderivprov|Related Exchange}}, the {{eqderivprov|Reference Price}} is less than the {{eqderivprov|Strike Price}}); and
:{{eqderivprov|3.4(d)}} “'''{{eqderivprov|Reference Price}}'''” means the price per {{eqderivprov|Share}} or amount per {{eqderivprov|Basket}} determined as provided in the related {{eqderivprov|Confirmation}} as of the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}} or, if no means of determining such price or amount are so provided, in respect of a {{eqderivprov|Share Option Transaction}}, the {{eqderivprov|Relevant Price}} of the Share (for which purpose the {{eqderivprov|Valuation Time}} and the {{eqderivprov|Valuation Date}} will be the {{eqderivprov|Expiration Time}} and the {{eqderivprov|Expiration Date}}, respectively) and, in respect of a {{eqderivprov|Share Basket Option Transaction}}, the sum of the values calculated as of the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}} for the {{eqderivprov|Shares}} of each {{eqderivprov|Issuer}} as the product of the {{eqderivprov|Relevant Price}} of such Share (for which purpose the {{eqderivprov|Valuation Time}} and the {{eqderivprov|Valuation Date}} will be the {{eqderivprov|Expiration Time}} and the {{eqderivprov|Expiration Date}}, respectively) and the relevant {{eqderivprov|Number of Shares}} comprised in the {{eqderivprov|Basket}}. <br>
:{{eqderivprov|3.4(d)}} “'''{{eqderivprov|Reference Price}}'''” means the price per {{eqderivprov|Share}} or per {{eqderivprov|Basket}} determined as of the {{eqderivprov|Expiration Time}} on the {{eqderivprov|Expiration Date}} and, if no means of determining such price or amount are provided, that will be:
::(i) '''For a {{eqderivprov|Share Option Transaction}}''': The {{eqderivprov|Relevant Price}} of the {{eqderivprov|Share}}  
::(ii) '''For a {{eqderivprov|Share Basket Option Transaction}}''':the sum of the values for each {{eqderivprov|Share}} in the {{eqderivprov|Basket}} determined as its {{eqderivprov|Relevant Price}} multiplied by its {{eqderivprov|Number of Shares}} (in either case, using the {{eqderivprov|Valuation Time}} and {{eqderivprov|Valuation Date}} as the {{eqderivprov|Expiration Time}} and {{eqderivprov|Expiration Date}})

Latest revision as of 12:12, 13 May 2022

3.4. Automatic Exercise. If “Automatic Exercise” applies to an Option Transaction then (unless, by the Expiration Time on the Expiration Date Buyer notifies Seller that Automatic Exercise should not occur) each unexercised Option will be automatically exercised:

3.4(a) Cash Settlement: at the Expiration Time on the Expiration Date; and
3.4(b) Physical Settlement: if the Calculation Agent determines the Option to be In-the-Money at such time, as at the Expiration Time on the Expiration Date.
3.4(c) “In-the-Money” means:
(i) For a Call: That the Reference Price at least equals the price at which a Related Exchange would automatically exercise a Physically-settled option on that Share with that Strike Price or, if there are no listed options on that Share or there is no Related Exchange, the Reference Price exceeds the Strike Price; and
(ii) For a Put: That the Reference Price is no greater than the price at which a Related Exchange would automatically exercise a Physically-settled option on that Share with that Strike Price or, if there are no listed options on that Share, or there is no Related Exchange, the Reference Price is less than the Strike Price); and
3.4(d) “Reference Price” means the price per Share or per Basket determined as of the Expiration Time on the Expiration Date and, if no means of determining such price or amount are provided, that will be:
(i) For a Share Option Transaction: The Relevant Price of the Share
(ii) For a Share Basket Option Transaction:the sum of the values for each Share in the Basket determined as its Relevant Price multiplied by its Number of Shares (in either case, using the Valuation Time and Valuation Date as the Expiration Time and Expiration Date)
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