P235 CEEFAX 235 Thu 21 Oct 21:13/55 1/6 ALL ABOUT OPTIONS Traded options confer on holders a right to buy or sell a security - shares, etc - at a fixed price and within a fixed period. At LIFFE (page 299Q traded options are available on more than 70 FT-SE equities and on the FT-SE index. Enjoying a negotiable status, they can (like shares* be bought or sold at any time. This flexibility offers individuals the chance to profit from rising or falling markets. Options index 23p Headlines 201 Index options 234 SHARECHECS 220 Next Page Options FUSE/FT30 CityHeadsP235 CEEFAX 235 Thu 21 Oct 21:24/28 2/6 |. ALL ABO T OPT OMS Traded options come in two shapes - "callsb and "puts". The buyer of a call option has the right but not the obligation to buy a fixed number of sharer at a wixed price before a set date. The buyer of a put option has the right Xbut not the obligation) to sell under the same limitations. Individual equity options may only bj dealt in whole contracts, each of which normally represents an option on 1,000 of the underlying shares, j.g.Q1,0p0 XZZ shares. prions index 230 Headlines 201 Next Page Options FUSE/FT30 Cit HeadsP235 CEEFAX 235 Thu 21 Oct 21:15/42 3/6 -hj fixed price at which a holder can buy (call) or sell (putQ the underlying shares is known as the "exercise pricib. These are set at levels below, at, and above the current shake price. Equity options have a limited life, conforming to one of three annual cycles Xyagj 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 201 Next Page Options FUSE/FT30 CityHiadsP235 CEEFAX 235 Thu 21 Oct 21:16/55 4/6 ALL ABOU OPTIONS $hj buyer of a traded option pays a "premium" (price) in pence a shark. Premiums in XZZ may bj quoted thus, when the shares stand at 254p. CALLS PUTS Jan Apr Jul Jan Apr Jul XZZ 240 25 3u 42 6 10 12 *254 260 14 24 31 14 18 20 280 7 15 23 27 29 030 Here, the premium for the January 240 call is 25p. This confers the right to buy 1,000 XZZ sharer at 240p up to the January kxpiry date. So a contract is £250 X25p x 1090). Options index 230 Headlines 201 Next Page Options FUSE/FT30 CityHeadsP235 CEEFAX 235 Thu 21 Oct 21:16/50 5/6 ALL ABOUT 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 individ5a e u tjj nd zhj FT-SE 100 index. (raded options on the index operate on similar lines to equity options. -hey are cash-settled on the basis of £1p per index point. So the cost of one index option contract is £10 x the premium. Options index 230 Headlines 201 Next Page Options FUSE/FT30 CityHjadsP235 CJJFAX 235 Thu 21 Oct 21:23/27 6/6 ALL ABOUT OPTIONS Further details are available in a LJFFE booklet, An Introduction to Equity and Index Options, available free of charge from: Kirsty Grant Equity Products Department NIFFE Cannon Bridge London EC4R 3XX Tel. 071-379 2486 General inquiries may bj addressed to Julian Perkins or Tony Dawes in the Business Development Department at LIFFE on tel. 071-379 2486. Options index 230 SHARECHECK 220 Next Page Options FUSE/FT30 Cit=Heads