Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Appendix A to Rule 15c3-1 -- Options

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1. 1. The term listed option shall mean any option traded on a registered national securities exchange or facility of a registered national securities association.
      
      
   2. The term unlisted option shall mean any option not traded on a registered national securities exchange or facility of a registered national securities association.
      
      
      

   Certain Adjustments to Net Worth For Listed Options Before Computing the Deductions Specified in (c) Below

2. 1. The market value of short positions in listed options shall be added to net worth and the market value of any long positions in listed options, which relate to long or short securities positions or short positions in listed options, shall be deducted from net worth, and;
      
      
   2. The amount by which the market value of a short security position, which is related to a long listed call, exceeds the exercise value of such long call, or the amount by which the exercise value of a long listed put, which is related to a long security position, exceeds the market value of the long security, shall be added to net worth, and;
      
      
   3. The amount by which the market value of the underlying security would exceed the exercise value of the short listed call, or the amount by which the exercise value of a short listed put exceeds the market value of the underlying security, shall be deducted from net worth.
      
      
      

   Deductions From Net Worth for Uncovered Options and Securities Positions in Which the Broker or Dealer Has Offsetting Option Positions

3. Every broker or dealer shall in computing net capital pursuant to 17 CFR Rule 15c3-1 deduct from net worth the percentages of all securities positions or options in the proprietary or other accounts of the broker or dealer specified below. However, where computing the deduction required for a security position as if the security position had no related option position and positions in options as if uncovered would result in a lesser deduction from net worth, the broker or dealer may compute such deductions separately.
   
   
   

   Uncovered Calls

   1. Where a broker or dealer is short a call, deducting, after the adjustment provided for in paragraph (b) of this Appendix A, 15 percent (or such other percentage required by paragraphs (c)(2)(vi)(A) through (K) of Rule 15c3-1) of the current market value of the security underlying such option reduced by any excess of the exercise value of the call over the current market value of the underlying security. In no event shall the deduction provided by this paragraph be less than $250 for each option contract for 100 shares.

      
      Uncovered Puts

   2. Where a broker or dealer is short a put, deducting, after the adjustment provided for in paragraph (b) of this Appendix A, 15 percent (or such other percentage required by paragraphs (c)(2)(vi)(A) through (K) of Rule 15c3-1) of the current market value of the security underlying the option reduced by any excess of the market value of the underlying security over the exercise value of the put. In no event shall the deduction provided by this paragraph be less than $250 for each option contract for 100 shares.

      Covered Calls

   3. Where a broker or dealer is short a call and long equivalent units of the underlying security, deducting, after the adjustments provided for in paragraph (b) of this Appendix A, 15 percent (or such other percentage required by paragraphs (c)(2)(vi)(A) through (K) of Rule 15c3-1) of the current market value of the underlying security reduced by any excess of the current market value of the underlying security over the exercise value of the call. No reduction under this paragraph shall have the effect of increasing net capital.
      
      

      Covered Puts

   4. Where a broker or dealer is short a put and short equivalent units of the underlying security, deducting, after the adjustment provided for in paragraph (b) of this Appendix A, 15 percent (or such other percentage required by paragraphs (c)(2)(vi)(A) through (K) of Rule 15c3-1) of the current market value of the underlying security reduced by any excess of the exercise value of the put over the market value of the underlying security. No such reduction shall have the effect of increasing net capital.

      Conversion Accounts

   5. Where a broker or dealer is long equivalent units of the underlying security, long an unlisted put written or endorsed by a broker or dealer and short an unlisted call in its proprietary or other accounts, deducting 5 percent (or 50 percent of such other percentage required by paragraphs (c)(2)(vi)(A) through (K) of Rule 15c3-1) of the current market value of the underlying security.
      
      
   6. Where a broker or dealer is short equivalent units of the underlying security, long an unlisted call written or endorsed by a broker or dealer and short an unlisted put in his proprietary or other accounts, deducting 10 percent (or 50 percent of such other percentage required by subdivisions (A)-(K) of subparagraph (c)(2)(vi) of 17 CFR Rule 15c3-1) of the market value of the underlying security.

      Long Over-the-Counter Options

   7. Where a broker or dealer is long an unlisted put or call endorsed or written by a broker or dealer, deducting 15 percent (or such other percentage required by paragraphs (c)(2)(vi)(A) through (K) of Rule 15c3-1) of the market value of the underlying security, not to exceed any value attributed to such option in paragraph (c)(2)(i) of Rule 15c3-1.

      Listed Options

   8. Where a broker or dealer is long listed options and there is no offsetting security position, deducting 50 percent of the market value of any net long positions in options in the same underlying security, with the same exercise price and the same expiration date. Where a broker or dealer has a net short position in an option in the same underlying security, with the same exercise price and the same expiration date and for which the broker or dealer does not have a related position in the underlying security or an option position otherwise provided for in this Appendix (A), the deduction shall be determined as provided in subparagraph (c)(1) or (2) of this Appendix (A).
      
      

      Certain Security Positions with Offsetting Options

   9. Where a broker or dealer is long a security for which it is also long a listed put (such broker or dealer may in addition be short a call), deducting, after the adjustments provided in paragraph (b) of this Appendix A, 15 percent of the market value of the long security position not to exceed the amount by which the market value of equivalent units of the long security position exceeds the exercise value of the put. If the exercise value of the put is equal to or exceeds the market value of equivalent units of the long security position, no percentage deduction shall be applied.
      
      
   10. Where a broker or dealer is short a security for which he is also long a listed call (such broker or dealer may in addition be short a put), deducting, after the adjustments provided in paragraph (b) of this Appendix A, 15 percent of the market value of the short security position not to exceed the amount by which the exercise value of the long call exceeds the market value of equivalent units of the short security position. If the exercise value of the call is less than or equal to the market value of equivalent units of the short security position no percentage deduction shall be applied.
       
       

       Certain Spread Positions

   11. Where a broker or dealer is short a listed call and is also long a listed call in the same class of option contracts and the long option expires on the same date as or subsequent to the short option, the deduction, after the adjustments required in paragraph (b) of this Appendix (A), shall be the amount by which the exercise value of the long call exceeds the exercise value of the short call. Provided, That if the exercise value of the long call is less than or equal to the exercise value of the short call, no deduction is required.
       
       
   12. Where a broker or dealer is short a listed put and is also long a listed put in the same class of option contracts and the long option expires on the same date as or subsequent to the short option, the deduction, after the adjustments required in paragraph (b) of this Appendix (A), shall be the amount by which the exercise value of the short put exceeds the exercise value of the long put. Provided, That if the exercise value of the long put is equal to or greater than the exercise value of the short put, no deduction is required.
       
       

       Certain Straddle Positions

   13. Where a broker or dealer is long a listed call and is also long a listed put for the same underlying security, the deduction shall be the greater of
       
       
       1. the deduction resulting from application of paragraph (c)(8) of this Appendix A to the long call; or
          
          
       2. the deduction resulting from application of the same paragraph to the long put.
          
          
   14. Where a broker or dealer is short a listed call and is also short a listed put for the same underlying security, the deduction, after application of the adjustments required by paragraph (a) of this Appendix A, shall be the greater of
       
       
       1. the deduction resulting from the application of paragraph (c)(1) of this Appendix A to the short call, or
          
          
       2. the deduction resulting from the application of paragraph (c)(2) of this Appendix A to the short put.

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