Clearing System

Clearing denotes all activities from the time an option is written until it is settled. This process turns the promise of payment of an option's intrinsic value into the actual movement of funds from one account to another, considering the option expires in the money.

Options are inherently risky ⚠️ and in the case of european style options writers are faced with a financial obligation towards options holders upon maturity of the option, proportional to the option intrinsic value and volume written.

Hence the exchange is required to implement a set of risk management rules for ensuring that writers will, in the large majority of cases, fulfill their financial obligations.

The options exchange collateral allocation model and its liquidation process are presented in the next sections. They've been designed to protect options holders against the risk of options writers defaulting their payment obligations, but at the same time with capital efficiency in mind as to allow writers a more flexible environment.