P235 CEEFAX 235 Thu 4 Nov 21:15/25 h/$ ALL ABOUT OPTIONS INaICJ psi ns onf n ho d r a FTaSE , 0ti d a/ T 30xid pr c 24 Dir Jn a avid ge i equO$,S n Enndon s a ks a t 24 Ua tlcks s r b bo o4d Fa na t & E This flexibility offers individuals V falling m r its. - j i SndjJ opCi 2s SHE ECHECu 228 Markets erst Opt FUSE/FT30 CityHjadsP235 CEJFAX 235a Thu 4 Nov 21:24/28 F ALL ABOU( OPTIONS Traded options conj in two shapes - "callsb and Rputsb. The buyer of a call option has the right but not the obligation to buy a fixed number of shares at a fixed 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 5ndjulyink shares, e.g. 1,000 XZZ shares. Options index 230 Headlines 201 Markets Girts Opt FUSE/FT30 CitzHjadsP235 CEEFAX 235 Thu 4 Nov 21:15/34 3/6 ALL ABOUT OPTIONS The fixed price at which a holder undjrl9ing shares is knosn as the "ex rcisj priceb. This are set at levels below, at, and above the current thar price. Equity options have a limited life, conforming to one of thu e annual cycles Tpagj 230). Three bxpiry options are quoted at any one time. XYZ, fms xampl , ma9 b on a Jan Apr/Jul/Oct cycle, with at any one time only the n arest shred months quoted for trading. Options index 230 Headlines 201 Markets Girts Opt FUSE/FT30 CityHeadsP235 CEEFAX 235 Thu 4 Nov 21:11/35 4/6 ALL ABOUT OPTIONS $hj buyer of a traded option pays a bpremium" Xprice) in pence a shar2. Premiums in XYZ may bj quoted thus, when the shares stand at 254p. "u CALLS PUTS Jan Apr Jul Jan Apr Jul XZZ 240 25 35 42 6 1X 012 *254 270 14 24 31 14 18 20 28p 7 15 23 27 29 030 Here, the premium for the January 24 call is 25p. The conf rs the right to buy 1,p00 XZZ shares at 240p up to the January expiry date. So a contract is £250 T25p | 1009). Options index 230 Headlines 201 Markets First Opt FUSE/FT30 CityHjadsP235 CEEFAX 235 Thu 4 Nov 21:06/39 5/6 ALL aBOUT OPTIONS Buying traded options involves 1 strictly limited risk: the maximum loss is limited to the premium of the option, which is a fraction of the share price. Ceifax displays prices of options on both indi6idual equities and the FT-SE 100 index. $radjd options on the index operate on similar lines to equity options. a h of £1p per index point.!So the cost of one index option contract is £10 x the premium. prions index 23p Headlines 201 Markets First Opt FUSE/FT30 CityHdadsP235 CJEFAX 235 Thy 4 Nov 21:07/21 ] 6/6 ALL ABOUT OPTIONS II Further d tails ar availabl in a M FFE booklet, An Introduction to Equity and Index Options, available free of chargr from: Kirsty Grant "5 Equity Products Dipbrtmjnt U L FFJ Cannon Bridge London EC4R 3XX General inquiries may bj addressed to Julian Perkins or Tony Haweu in the Business Development Department at LIFFE on tel. 071-379 2486. Options index 230 SHARECHECK 220 Markets Girts Opt FUSE/FT30 CityHjads