Option Disclosure Document

Options Disclosure Document (ODD): Purpose, Contents, and Requirements

What is the ODD?

The Options Disclosure Document (ODD), formally titled “Characteristics and Risks of Standardized Options,” is a guide published by the Options Clearing Corporation (OCC) to help investors understand options: what they are, how they work, and the risks involved. It is intended especially for new options traders but is also a useful reference for experienced market participants.

Who issues the ODD?

The OCC, the world’s largest equity derivatives clearinghouse, issues the ODD. The OCC clears transactions for exchange-listed options, securities futures, and certain over-the-counter options, and operates under the oversight of the SEC and the CFTC.

What the ODD covers

The ODD explains options terminology, structures, and risks. Typical chapters and topics include:
* Options nomenclature and core definitions
* Options on equity securities
* Index options and index contract multipliers
* Debt options and credit default options
* Foreign currency options
* Flexibly structured options
* Exercise and settlement procedures
* Tax considerations, transaction costs, and margin requirements
* Principal risks of options positions

Regulatory and distribution requirements

Regulators require brokers to provide investors with the ODD:
* The SEC approves supplements and changes to the ODD.
* Brokers must deliver the current ODD to customers before approving them to trade options (Securities Exchange Act Rule 9b-1 and FINRA rules).
* When supplements or updates are issued, brokers must also distribute them to customers who previously received the ODD. Delivery may be by mail or electronically if the customer has consented.
* The OCC historically issued supplements; starting in 2022 it indicated future changes will be published as updated editions of the entire document.

Key risks emphasized in the ODD

A central section of the ODD details the principal risks of options positions. Important points include:
* Option buyers can lose the entire premium paid in a short period.
* Option writers (sellers) may face substantial or unlimited risk depending on the position.
* Combination strategies (spreads, straddles, etc.) carry their own complexities and risks.
* Market disruptions in underlying assets and the special characteristics of index options can create additional exposure.

Where to get the ODD

The current ODD and any updates are available from brokers and can be downloaded as a PDF from the Options Clearing Corporation’s website.

Key takeaways

• The ODD is the OCC’s official guide to standardized options—definitions, mechanics, and risks.
• Brokers must provide the ODD to customers before approving options trading and must supply updates.
• Read the “Principal Risks” section carefully—options can result in rapid and complete loss of the premium, and some positions can expose traders to significant or unlimited risk.
• The OCC publishes the ODD and makes it publicly available online.