P235 CEEFAX 235 Fri 6 Jan 21:06/27 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 299) traded options are available on more than 70 FT-SE equities and on the FT-SE indj|. Enjoying a negotiable status, they can (like shares) bj bought or sold at any time. This flexibility offers individuals the chance to profit from rising or falling markets. Options index 230 Headlines 201 Index options 234 SHARECHECK 220 Markets First Opt FT-SE 100 Cit=HeadsP235 CEEFAX 235 Fri 6 Jan 21:04/15 2/6 ALL ABOUT OPTIONS -radjd options conj in two shapes - "calls" and "puts". 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 underlying shares, j.g. 1,000 \ZZ sharer. Options index 230 Headlines 201 Markets First Opt FT-SE 100 CityHjadsP235 CEEFAX 235 Fri 6 Jan 21:09/38 G ALL ABOUT OPTIONS The fixed price at which a holdjz can buy (call) or sell (put) the underlying shares is known as the "exercise priceb. Thjsj 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 201 Markets First Opt FT-SE 100 CityHjadsP235 CEEFAX 235 Fri 6 Jan 21:07/10 4/6 ALL ABOUT OPTIONS The buyer of a traded option pays a "premium" (price) in pence a shake. Premiums in XYZ may bj quoted thus, when the shares stand at 254p. CALLS PUTS Jan Apr Jul Jan Apr Jul XZZ 240 25 35 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 expiry datu. So a contract is £250 (25p | 1000). Options index 230 Headlines 201 Markets First Opt FT-SE 100 CityHeadsP235 CEEFAX 235 Fri 6 Jan 21:05/02 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 individual equities and the FT-SE 100 index. Traded options on the index operate on similar lines to equity options. They are cash-settled on 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 FT-SE 100 CityHjadsP235 CEEFAX 235 Fri 6 Jan 21:01/10 G ALL ABOUT OPTIONS Further details are available in 1 LIFFE booklet, An Introduction to Equity and Index Options, available free of charge from: Kirsty Grant Equity Products Department LIFFE Cannon Bridge London EC4R 3XX T l. 071-379 2486 General inquiries may b address d to Tony Dawes or Kaly Thavarajah in the Business Development Department at LJFFE on tel. 071-379 2442. Options index 230 SHARECHECK 220 Markets First Opt FT-SE 100 CityHeads