PC21540_N 30/5/03 7:48 AM Page 1 ASX Options Clever products for clever investors BULL STRATEGIES NEUTRAL STRATEGIES BEAR STRATEGIES Overall, these positions will do better if Overall, these positions will do better if the or index market does not move very much. Overall, these positions will do better if the stock or index market rises. the stock or index market falls. Synthetic Long Synthetic Short

Example: Example: Sell 2 Calls, Buy 1 Call at higher strike and Example: Example: Buy 1 Call and Sell 1 Put at the same strike Buy 1 Call at lower strike Sell 1 Call and Sell 1 Put at the same strike Buy 1 Put and Sell 1 Call at the same strike Market Outlook: Bullish Market Outlook: Neutral Market Outlook: Neutral Market Outlook: Bearish Risk: Substantial Risk: Limited Risk: Unlimited Risk: Unlimited Reward: Unlimited Reward: Limited Reward: Limited Reward: Substantial Increase in : Neutral Increase in Volatility: Typically hurts position Increase in Volatility: Hurts position Increase in Volatility: Neutral Time Decay: Neutral Time Decay: Typically helps position Time Decay: Helps position Time Decay: Neutral ASX OPTIONS SINCE 1976 Long Call Contracts Traded Index Points Long Put 16,000,000 4000 Retail lending 14,000,000 courses commenced as collateral 3500

12,000,000 3000 ’87 market correction 10,000,000 2500 Example: Example: Buy 1 Call 8,000,000 2000 Buy 1 Put Market Outlook: Bullish Market Outlook: Bearish Risk: Limited Risk: Limited Reward: Unlimited 6,000,000 1500 Reward: Substantial Increase in Volatility: Helps position O/seas market Increase in Volatility: Helps position Time Decay: Hurts position 4,000,000 1000 Time Decay: Hurts position Automated trading makers introduced 2,000,000 introduced – CLICK 500

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Call 75/76 76/77 77/78 78/79 79/80 80/81 81/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 Put Backspread Options Volume All Ords Index THE SPECTRUM

Example: Bullish Neutral Bearish Example: Sell 1 Call and Buy 2 Calls at a higher strike Sell 1 Put and Buy 2 Puts at a lower strike Market Outlook: Bullish Market Outlook: Bearish Risk: Limited Risk: Limited Reward: Unlimited write Reward: Substantial Increase in Volatility: Typically helps position Increase in Volatility: Typically helps position Time Decay: Typically hurts position or Time Decay: Typically hurts position combinations

Bull Spread bull bear spreads spreads

Example: buy stock, sell call overwrite Example: Buy 1 Call (Put) and Sell 1 Call (Put) at higher Sell 1 Put (Call) and Buy 1 Put (Call) at higher strike strike Market Outlook: Moderately Bullish buy bonds, sell put buy Market Outlook: Moderately Bearish Risk: Limited Risk: Limited Reward: Limited Reward: Limited Increase in Volatility or Time Decay: buy call buy put Increase in Volatility or Time Decay: Helps or hurts depending on strikes chosen Helps or Hurts depending on strikes chosen

Buy Write Short Butterfly Long Straddle Short Call

Example: Example: Buy 2 Puts, Sell 1 Put at higher strike and Example: Example: Buy 1000 shares and Sell 1 Call Sell 1 Put at lower strike Buy 1 Call and Buy 1 Put at the same strike Sell 1 Call Market Outlook: Neutral to Slightly Bullish Market Outlook: Strong move in either direction Market Outlook: Strong move in either direction Market Outlook: Neutral to Slightly Bearish Risk: Substantial Risk: Limited Risk: Limited Risk: Unlimited Reward: Limited Reward: Limited Reward: Unlimited Reward: Limited Increase in Volatility: Hurts position Increase in Volatility: Typically helps position Increase in Volatility: Helps position Increase in Volatility: Hurts position Time Decay: Helps position Time Decay: Typically hurts position Time Decay: Hurts position Time Decay: Helps position

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