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Here is a hypothetical scenario: Bank A sells 1 SPX CALL/PUT to a retail trader who uses Bank B. The SPX becomes in the money. SPX is cash-settled. So Bank A transfers reserves held at Federal Reserve to Bank B to settle interbank liabilities.
Is that allowed?
Yes.
Deposits with the Federal Reserve are assets owned by bank A. Typically they are rebalanced everyday. So:
Day 1: Bank A deposits $ 1bn with FED.
Day 2: Bank A receives back $1bn, pays $100mm to another CP and deposits $900mm with FED.
Providing the bank operates within official regulations what it does with its $1bn is its own business, i.e. one such regulation might be maintaining a specific minimum reserve requirement relating to its retail liabilities, (i.e retail deposits).
There are two forms of liability with options. The margin and the actual final settlement. Every day the options are evaluated to see their value. As the options fluctuate in value one counterparty will need to post more collateral and the other side will receive the collateral. In the case of OTC options the collateral may go to a neutral 3rd party. In the case of listed you are going to deliver collateral to the OTC.
In all of the above cases you are not delivering reserves. You are delivering bonds, bills, maybe gold, certain stocks in the case of certain collateral agreements.
For final settlement, you get your collateral back and then use SWIFT to sent the actual money. In that case you are sending actual reserves. Then, as mentioned above, the reserves are entirely fungible.
Perhaps worthy of distinction is that a bank swap dealer would be a bilateral counterparty for an OTC uncleared derivative, but most options trade through broker-dealers and are centrally cleared (OCC, not the Fed). Retail trades would not go through the bank; they would trade through a broker who has an account with the OCC and must maintain certain excess margin / collateral there for its book of accounts. The broker is responsible for ensuring its customers' trades settle; the individual trader is the responsibility of the broker. The OCC guarantees performance of the settlement between brokers. Again, this does not happen at the Fed, but at the OCC. No wiring takes place at settlement, instead, brokers are debited or credited for their balance.
