Options Contracts

Definition

A contract giving its holder the right, but not the obligation, to buy (a call) or sell (a put) an asset at a set price on or before a set date, in exchange for a premium paid to the seller, who bears the obligation. Options on securities, certificates of deposit, or securities indexes are securities under the Securities Act of 1933 and the Securities Exchange Act of 1934^[1]; options on rates, currencies, commodities, and similar interests are generally swaps under the Commodity Exchange Act, which excludes securities options and options on futures contracts^[2].

Federal law

1. An Act to clarify the jurisdiction of the Securities and Exchange Commission and the definition of security, Pub. L. 97-303, §§ 1-2, 96 Stat. 1409. Added puts, calls, straddles, and options on securities to the definition of 'security' in the Securities Act of 1933 and the Securities Exchange Act of 1934. Official text: govinfo.gov, U.S. Government Publishing Office.
2. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, § 721, 124 Stat. 1658 (Commodity Exchange Act § 1a(47), 7 U.S.C. § 1a(47)). Defined 'swap' to include options of any kind on rates, currencies, commodities, securities, and other interests, while excluding options on securities and options on futures (7 U.S.C. § 1a(47)). Official text: govinfo.gov, U.S. Government Publishing Office.