Options disclosure document (ODD)
Also known as: ODD, Characteristics and Risks of Standardized Options
The options disclosure document (ODD) is a risk-disclosure booklet, created by the Options Clearing Corporation (OCC), that must be delivered to every customer at or before the approval of their account for options trading.
The options disclosure document, formally titled Characteristics and Risks of Standardized Options, is a plain-language booklet that explains how listed options work and the risks they carry. It is created and published by the Options Clearing Corporation (OCC) — a frequent exam question — and covers option mechanics, exercise and assignment, tax considerations, and the risks of each basic strategy.
Delivery timing is strictly regulated. A firm must provide the ODD to a customer at or before the time the account is approved for options trading. No options trade can occur until the account has been approved by a registered options principal, so in practice every options customer receives the document before placing their first trade. When the OCC amends the booklet, firms must distribute the updated version to their options customers.
The ODD works alongside the options agreement. After approval, the customer must sign and return the options agreement — in which they acknowledge the risks and agree to abide by exchange rules and position limits — within 15 days of account approval. If the signed agreement doesn't come back in time, the firm must restrict the account to closing transactions only; no new option positions may be opened.
The SIE, Series 7, and Series 9 exams all test the ODD within their options account material. Know who creates it (the OCC), when it must be delivered (at or before account approval), and how it fits into the account-opening sequence with the options agreement and its 15-day deadline.
Key takeaways
- The ODD is the OCC-published booklet Characteristics and Risks of Standardized Options.
- It must be delivered at or before the time a customer's account is approved for options trading.
- The related options agreement must be signed and returned within 15 days of approval, or the account is limited to closing transactions.
- Amendments to the ODD must be distributed to existing options customers.
- The SIE, Series 7, and Series 9 exams test who creates the ODD and the delivery timeline.