P235 CEEFAX 235 Thu 7 Oct 21:16/1p ^ 1/6 ALL ABOUT OPTIONS Traded options confer on holders a right to buy or sell a security - shares, etc m at a fixed price and within a fixed period. At LIFFE (page 299) traded options are available on more thbn 70 FT-SE equities and on the FT-SE index. 2 Enjoying a njgotiableQstatus, they can (like shaker) bj bought or sold at any time. This glexibilit8 gffdr1 i&di6h451l5 the chance to profit from rising or falling markets. Options index 230 Headliner 201 Index options 234 SHARECHECS 220 Next Page prions FUSE/FT30 CityHeadsP235 CEJFAX 235 Thu 7 Oct 21:17/06 2/6 Traded options come in two shapes - "calls and "putsb. The buyer of a call option has the right but not the obligation to bu: a fixed number of shares at a fixed price before a set date. The buyer of 1 put option has the right Xbut not the obligation* to sell ;ndjr the 3amj limit signs. Individual equity options may only be dealt in whole contracts, each of which normally represents an option on 1,000 of the undjul9ing sharer, e.g. 1,000 \ZZ shareuW Options index 230 Headlines 201 onP235 CJEFAX 235 Thu 7 Oct 21:18/47 G ALL aBOUT OPTIONS The fixed price at which a holder can buy (call) or sell (put) the underlying shares is known as the "exercise priceb. $hjsj are set at levels below, at, and above the current share price. Equity options have a limited life, conforming to one of three annual cycles Xpagj 230). Three expiry options are quoted at any one time. XZZ, for example, may bj on a Jan/Apr/Jul/Oct cycle, with at any one time only the nearest three months quoted for trading. Options index 230 Headlines 201P235 CEEFAX 235 Thu 7 Oct 21:08/49 4/6 I $hj buyer of a traded option pays a "premium" (price) in pence a share. Premiums in XYZ may bj quoted thzs, when the shares stand at 254p. C—LLS PUTS Van Apr ul Van Apr Jul XZZ F240 25 35 42 6 1: 12 *2*) 260 14 24 31 14 18 20 U 280 7 15 23 27 29 30 p Here, the premium for the January 240 call is 25p. This confers the right to buy 1,p00 XZZ shares at 24pp up to the January kxpiry date. So a contract is0£25( h258 | )XX(). Options index 230 Headliner 201P235 CEEFAX 235 Thy 7 Oct 21:24/42 5/6 ALL ABOU( OPTIONS Buying traded options involves a strictly limited risk: the maximum loss is limited to the premium of the option, which is a fraction of the share price. Ceefax displays prices of options on both individual equities and the FT-SE 100 index. -radjd options on the index operate on similar lines to equity options. $hey are cash-settled on the basis of £10 per index point.QSo the cost of on ind x option contract is £10 x the premium. Options index 230 Headlines 201 N xt Page prions FUSE/FT30 CityH adsP235 CEEFAX 235 Thu 07 Oct 21:10/33 F ALL ABOUT OPTIONS I FurtPjr details are avbilable in a LJFFJ booklet, An Introduction to Equity and Index Options, available free of charge from:Q pppR p Kirsty Grant Equity Products fjpartment FNIFFE 0Cannon bridgr London EC4R 3XX QRRR Tel. 071M579 2486 General inquiries may bj addressed to Julian Perkins or Tony Haweu in the Business Development Department at LJFFJ on tel. 071-379 2486. Options index 230 SHARECHECK 220 Next Page Options FUSE/FT30 CityHjads