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This explains them: http://www.tradeking.com/AdTrack/TYO0508FR0FR010/FRO

This is pretty useful in understanding them: http://www.tradeking.com/AdTrack/TYO0508FR0FR010/FRO

This is my attempt to summarize: http://www.tradeingroups.com/amex-fro-settlement-index-vwap/

If they did it based on closing price, seems it would be simple to manipulate it one penny in either direction. Question is has anyone tried it and how did it work out?

The settlement index is designed to take an average price on the day your option expires. Since you are either 'in-the-money' or 'out-of-the-money' by 1 cent either way, they had to use an average: http://www.tradeingroups.com/understanding-fixed-return-options-fros/

I did some research and put together a summary of FROs for anyone who is interested. http://www.tradeingroups.com/understanding-fixed-return-options-fros/