Option in the United States

Option Definition

“A right of choice or election. Sometimes applies specifically to contracts whereby one purchases the right for a certain time, at his election, to demand and receive or to deliver property at a stated price”, according to the definition of Option based on The Cyclopedic Law Dictionary . For other meanings of it, read Option in the Legal Dictionary here.

Practical Information

An agreement, usually in consideration for the payment of a certain sum of money by the offeree, to hold an offer open for a definite time. The offer ceases to be an offer and becomes a contract of option; it cannot be withdrawn until the option period expires. Although an option is generally based upon a consideration, a few states require no consideration if the contract is in writing. Others recognize an option under seal as binding because a seal, at common law (in U.S. law), indicates consideration. The consideration for an option is not returnable to the optionee if he or she fails to take up the option; it is however, usually applied to the purchase price if the offer is accepted. (Revised by Ann De Vries, 1982)

Legal Materials

The Chicago Board Options Exchange (CBOE) posts statistics, company listings, free real-time Quotes, etc. for commodities.

Quotes for puts and calls on listed stock options and stock index options are published in the “Index/Listed Options” section of The Wall Street Journal and the “Market Watch” section of Barron’s.

Historical quotes are available from Market Data Express and OptionsMetrics and Tick Data. You can also get data from Bloomberg for up to one year after the option expires.

CBOE Rule Filings: When the CBOE wants to change its rules, it is required to file the proposed rule change on Form 19B-4 with the SEC. The CBOE posts the proposed filing on its CBOE Rule Filings page in PDF format. These are also available in PDF format on Lexis Securities Mosaic.

The SEC then puts out a Release / Notice of the proposed rule change and solicits comments on the proposal. The Release / Notice is posted on the SEC’s CBOE Rulemaking page and published in the Federal Register (see “Federal Register“) and with other SEC Releases (see the “Securities and Exchange Commission” entry).

If the SEC approves the rule change, it will issue a Release / Order approving the rule change that is also published in the Federal Register and with other SEC Releases (see the “Securities and Exchange Commission” entry in this legal Encyclopedia).

The proposed rule filings and the SEC Releases all reference a unique “File Number” in the format: SR-CBOE-[year]-xxx. You can use this number when you search for any of the documents concerning that particular rule change.

Option in Foreign Legal Encyclopedias

For starting research in the law of a foreign country:

Link Description
Option Option in the World Legal Encyclopedia.
Option Option in the European Legal Encyclopedia.
Option Option in the Asian Legal Encyclopedia.
Option Option in the UK Legal Encyclopedia.
Option Option in the Australian Legal Encyclopedia.

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See Also

  • Legal Contracts.
  • Gambling Contract
  • Commodities and Commodities Regulation
  • Commodities Futures Trading Commission
  • Commodity Prices
  • Futures Contracts
  • Stock Prices

Further Reading (Articles)

  • Option contract investments, New Straits Times; July 31, 2000
  • Bearish Options, Futures (Cedar Falls, IA); August 1, 2004; Salcedo, Yesenia
  • Options Backdating, The CPA Journal; October 1, 2007; Siegel, Marc A.
  • Options system needs changes, but the right changes.(Knight Ridder Newspapers), Knight Ridder/Tribune News Service; April 10, 2002; Gillmor, Dan
  • Options as a shield against a sec. 382 ownership change., The Tax Adviser; June 1, 1993; Bloom, Gilbert D.

Option: Open and Free Legal Research of US Law

Federal Primary Materials

The U.S. federal government system consists of executive, legislative, and judicial branches, each of which creates information that can be the subject of legal research about Option. This part provides references, in relation to Option, to the legislative process, the federal judiciary, and the primary sources of federal law (cases, statutes, and regulations).

Federal primary materials about Option by content types:

Laws and Regulations

US Constitution
Federal Statutory Codes and Legislation

Federal Case Law and Court Materials

U.S. Courts of Appeals
United States courts of appeals, inclouding bankruptcy courts and bankcruptcy appellate panels:

Federal Administrative Materials and Resources

Presidential Materials

Materials that emanate from the President’s lawmaking function include executive orders for officers in departments and agencies and proclamations for announcing ceremonial or commemorative policies. Presidential materials available include:

Executive Materials

Federal Legislative History Materials

Legislative history traces the legislative process of a particular bill (about Option and other subjects) for the main purpose of determining the legislators’ intent behind the enactment of a law to explain or clarify ambiguities in the language or the perceived meaning of that law (about Option or other topics), or locating the current status of a bill and monitoring its progress.

State Administrative Materials and Resources

State regulations are rules and procedures promulgated by state agencies (which may apply to Option and other topics); they are a binding source of law. In addition to promulgating regulations, state administrative boards and agencies often have judicial or quasi-judicial authority and may issue administrative decisions affecting Option. Finding these decisions can be challenging. In many cases, researchers about Option should check state agency web sites for their regulations, decisions, forms, and other information of interest.

State rules and regulations are found in codes of regulations and administrative codes (official compilation of all rules and regulations, organized by subject matter). Search here:

State opinions of the Attorney General (official written advisory opinions on issues of state law related to Option when formerly requested by a designated government officer):

Tools and Forms

Law in Other Regions

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