P235 CEEFAX 235 Mon 11 Nov 22:18/22 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 pjtiod. At LIFFE (page 299) 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) 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 220P235 CEEFAX 235 Mon 11 Nov 22:18/52 2/6 ALL ABOUT OPTIONS Traded options come in two shapes - "calls" and "puts". The buyer of a call option has the right but not the obligation to buy a fixed numbjt of shares at a fixed price before a set date. The buyer of a put option has the right (but not the obligation) to sell under the same limitations. Individual equity options may only be dealt in whole contracts, each of which normally represents an option on 1,000 of the underlying shares, j.g. 1,000 XZZ shares. Options index 230 Headlines 201P235 CEEFAX 235 Mon 11 Nov 22:49/21 3/6 ALL ABOUT OPTIONS The fixed price at which a holder can buy (call) or sell (put) the underlying shares is known as the "exercise price". 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 (page 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 Mon 11 Nov 21:20/53 4/6 ALL ABOUT OPTIONS The buzjt of a traded option pays a "premium" (price) in pence a share. Premiums in XZZ may be 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 30 Here, the premium for the January 240 call is 25p. This confers the right to buy 1,000 XZZ shares at 240p up to the January expiry date. So a contract is £250 (25p x 1000). Options index 230 Headlines 201P235 CEEFAX 235 Mon 11 Nov 21:30/22 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 pet index point. So the cost of one index option contract is £10 x the premium. Options index 230 Headlines 201P235 CEEFAX 235 Mon 11 Nov 22:11/21 6/6 ALL ABOUT OPTIONS Furthjt details are available in a LIFFE booklet, An Introduction to Equity and Index Options, available free of charge from: Equity Products Department LIFFE Cannon Bridge London EC4R 3XX Tel. 0171-379 2486 Web. www.liffe.com General inquiries may be addressed to Kaly Thavarajah in the Business Development Department at LIFFE on til. 0171-379 2442. Options index 230 SHARECHECK 220