Position Limits and Exercise Limits

What this video covers

• How to aggregate positions by side of the market: long calls with short puts as bullish, long puts with short calls as bearish, never all four types combined
• Why the base position limit is 25,000 contracts and how a stock qualifies for higher tiers up to 250,000 based on six-month trading volume and shares outstanding
• The specific tier thresholds: 50,000, 75,000, 200,000, and 250,000 contracts, and what volume gets you there
• Where broad-based index options may have no position limits, while narrow-based index options still carry exchange-set caps of 18,000, 24,000, or 31,500 contracts
• How interest rate options are capped separately at 5,000 contracts for short-term Treasury measures and 25,000 for long-term Treasury measures
• What exercise limits are: the cap on contracts exercisable within five consecutive business days, generally equal to position limits for the same underlying
• The exam's favorite trap questions: mixing all four position types, confusing base limit with maximum limit, and forgetting the five-day rolling window