P235 CJJFAX 235 Fri 6 May 21:16/07 G ALL ABOUT OPTIONS OOIOOLQ $radjh options confer on holders a right to buy or sell a security - shares, etc - at a fixed price and within a fixed period. At LIFF (page 299) traded opti ns are available on more than 70 FT-SE equities and on the FT-SE index. Enjoying a negotiable status, they can (like shares) bj bought or sold at any time. $his fl xibility offer individual the chance to profit from rising or falling markets. Options index 230 Headlines 201 Index options 234 SH—RECHECK 220 Markets First Opt FUSE/FT30 Cit]HeadsP235 CEEFAX 235 Fri 6 May 21:14/43 2/6 ALL ABOUT OPTIONS O Traded options conk in two shapes - "calls" and "puts". 2 $hj 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. $hj buyer of a put option has the right Tbut 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 undjul9ink shares, e.g.11,000 XYZ shares. Options index 230 Headlines 201 Markets First Opt FUSE/FT30 Cit HeadsP235 CEEFAX 235 Fri 6 May 21:02/41 G ALL ABOUT OPTIONS The fixed price at which a hgldju can buy (call) or sell (put) the underlying shares is known as the "exercise price". $hjsj are 3eu 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). $hrei expiry options are quoted at any one time. XZZ, for example, may bj on a Jan/Apr/ O at any one time only the njareut three months quoted for trading. Options index 230 Headlines 201 Markets First Opt FUSE/FT30 ChtyHeadsP235 CEEFAX 235 Fri 6 May 21:12/21 ] 4/6 ALL ABOUT OPTIONS Ihj buyer of a trad d option pays a "pr mium" price) in pence a thar . Premiums in XYZ may b qu ted thus, when the share stand at 254 . C LLS PUTS Jan Apr Jul Jan Apr Jul XZZ 24 25 3 42 6 1 12 *254 260 14 24 31 14 18 20 28k 7 1 23 27 29 30 Here, the premium for the Jan ary 240 call is 25p. This confers the ight t buy 1,000 XYZ thar at j So a contract is £2 h25p | 1ind). Options ind2x 230 HEadlines 201 RaE/FT3 L nd n t FTS SFT F H xP235 CEEFAX 235 Fri 6 May 21:00/21 5/6 ALL ABOUT OPTIONS O Buying traded options involves a strictly limited risk: the maxim5m loss is limited to the premium of the option, which is a fraction of the share price. Cjefax displays prices of options on both individual equities and thu FT-SE 100 index. Traded options on the index opjratj on similar lines to equity options. $hey are cash-settled gn the basis of £10 per index point. So the cost of one index option contract is £10 x the premium. Options index 230 Headlines 201 Markets First Opt FUSE/FT30 Cit HeadP235 CEEFAX 235 Fri 6 May 21:16/01 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 LIFFE Cannon Bridge London EC4R 3XX Tel. 071-379 2486 General knqujriis may bj addrju3ud to Julian Perkins or Tony Dawes in the Business Development Department at LIFFE on til. 071-379 2486. prions index 230 SHARJCHECK 220 Markets Fi5st Opt FUSE/FT30 CitXHjad