Key Takeaways
- All options orders must be reviewed for accuracy and appropriateness.
- Order tickets must contain all required information.
- Supervisors must verify customer authorization for each order type.
- Opening and closing transactions require different considerations.
- Time-sensitive orders require prompt execution and supervision.
Last updated: January 2026
Options Order Supervision
Supervising options orders is a critical function. You must ensure orders are entered correctly, authorized by the customer, and executed appropriately.
Order Ticket Requirements
Every options order ticket must contain specific information:
Required Order Ticket Elements
| Element | Description |
|---|---|
| Account number | Customer's account identifier |
| Date and time | When order was received |
| Option details | Underlying, expiration, strike, type (call/put) |
| Quantity | Number of contracts |
| Side | Buy or sell |
| Opening/Closing | Whether opening or closing a position |
| Price | Market, limit, or other instruction |
| Time in force | Day order, GTC, etc. |
Order Designations
| Designation | Meaning |
|---|---|
| BTO | Buy to Open (new long position) |
| STO | Sell to Open (new short position) |
| BTC | Buy to Close (close short position) |
| STC | Sell to Close (close long position) |
Exam Tip: The opening/closing designation is critical for proper position tracking and margin calculation.
Order Types and Supervision
Market Orders
| Consideration | Supervisor Action |
|---|---|
| Execution risk | Ensure customer understands immediate execution |
| Volatile markets | Extra caution during high volatility |
| Illiquid options | May result in poor fills |
Limit Orders
| Consideration | Supervisor Action |
|---|---|
| Price reasonability | Verify limit price is realistic |
| Partial fills | Monitor for completion |
| Time in force | Ensure customer's intent is captured |
Stop Orders
| Type | Description | Risk |
|---|---|---|
| Stop | Becomes market when triggered | Execution price uncertainty |
| Stop-limit | Becomes limit when triggered | May not execute |
Authorization Verification
Types of Authorization
| Type | Description | Documentation |
|---|---|---|
| Trade-by-trade | Customer authorizes each order | Order ticket notation |
| Discretionary | Firm makes trading decisions | Written authorization required |
| Time/price | Customer authorizes, firm chooses execution | Must be same day |
Discretionary Account Rules
| Requirement | Details |
|---|---|
| Written authorization | Customer must sign discretionary agreement |
| Supervisor approval | Each order must be reviewed |
| Documentation | Maintain records of authorizations |
| Review frequency | Daily review of discretionary activity |
Trade Execution Monitoring
Best Execution Requirements
Supervisors must ensure:
- Orders are executed promptly - No unreasonable delays
- Best available price - Seek most favorable terms
- Fair treatment - All customers treated equally
- Documentation - Maintain execution records
Monitoring for Irregularities
| Red Flag | Concern |
|---|---|
| Pattern of delays | Possible cherry-picking |
| Unusual price execution | Potential front-running |
| Excessive cancellations | Possible manipulation |
| After-hours entries | Timestamp integrity |
Test Your Knowledge
Which order designation indicates a customer is establishing a new short options position?
A
B
C
D
Test Your Knowledge
For discretionary options accounts, which of the following is required?
A
B
C
D