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Unformatted text preview: ASX 297_DL Index options 4/12/02 11:24 AM Page 1 How can I find out more?
• speak to an ASX accredited derivatives adviser
at your broker’s office
• read the free ASX booklet ‘Understanding
• attend an ASX options course
• phone 1800 028 585
• email email@example.com
• visit www.asx.com.au/options
• to look up index option prices use the code XJO. Trade the top 200 stocks
in the market with just
one transaction This material is general and summary information only. Any advice or
recommendation, (including relating to financial products) should be
obtained from an Australian financial services licensee or other
professional adviser. To the extent permitted by law, no responsibility for
any loss arising in any way (including by way of negligence) suffered by
anyone acting or refraining from acting as a result of this material is
accepted by ASX.
© Copyright ASX Operations Pty Limited ABN 42 004 523 782. 2002.
All rights reserved. This publication should not be reproduced, stored
in a retrieval system or transmitted in any form, whether in whole or
in part, without the prior written consent of ASXO. Index options S&P™ is a trademark of Standard & Poors division of The McGraw-Hill
ASX200™ is a trademark of ASX Operations Pty Ltd ABN 42 004 523 782.
Edition 2 printed April 2002 Phone 1800 028 585 or visit www.asx.com.au/options Trade the top 200 stocks in one transaction ASX 297_DL Index options 4/12/02 11:24 AM Page 2 Index options S&P/ASX 200 Index Index options - a trading example: 4000
500 • protect the value of your share portfolio 1. One easy transaction • diversify your portfolio Buying a call option over the S&P/ASX 200 index gives
you exposure to a share portfolio of 200 of the largest
stocks on the market. This can be an effective way to
invest if you have limited funds. Let’s say that in January the S&P/ASX 200 Index is
at 3400 points and you think the market is going to
increase over the next three months. As an alternative
to buying a portfolio of shares directly, you decide
to buy a March 3400 S&P/ASX 200 call option for 90
points or $900. In mid-March the S&P/ASX 200 Index
has risen to 3590 points and the March 3400 call is
now trading at 210 points. You decide to ‘close out’
your position by selling the March 3400 call option and
make the following profit: Why should you invest in index options? • earn extra returns Nov-01 May-01 Nov-00 May-00 Nov-99 May-99 Nov-98 May-98 Nov-97 May-97 Nov-96 May-96 Nov-95 May-95 Nov-94 May-94 Nov-93 0
May-93 • participate in many of Australia’s leading companies
in one trade as a cost-effective alternative to
share ownership 2500 Nov-92 For all share investors, large or small, this means you can: 3000 May-92 Index options over the S&P™/ASX 200™ Index provide
wide coverage of the share market. It only takes one
simple transaction to hold a view across the broad market. • profit on the performance of the benchmark stocks
used by professional investors
• tailor your exposure to take advantage of limited
risk strategies. What is the S&P/ASX 200 Index?
Regarded as a leading benchmark by professional
investors for broad movements in the stockmarket,
the S&P/ASX 200 index reflects the prices of the
largest 200 stocks currently listed on ASX, and
represents almost 90% of the market as a whole.
The growth in the index shown in the following graph
is an indicator of the increase in the price of shares
traded on ASX in general. Premium 2. More trading opportunities
With the ease of trading and low transaction costs,
you can gain short-term exposure to market moves and
can profit from small changes due to leverage. You can
take advantage of trading opportunities whilst leaving
your share portfolio intact. Advanced investors can
also short the market, which can lead to increased
3. Insure the future of your share portfolio
Buying an index put option helps protect your share
portfolio from stock market downturns without
changing the actual holding. It enables you to reduce the
overall market risk of holding shares in falling markets.
4. Minimise the cost of trading
Index options can be used as margin offsets if you
are trading other options. Index options also cost
considerably less than buying every security in the index. Premium Value Early January: Buy 3400 call 90 points
Mid March: Profit* $900 Sell 3400 call 210 points $2,100 120 points $1,200 *Excluding transaction charges and commissions. The same principles of buying and selling stock options
apply to index options. They offer you the investment
and risk management tools used by fund managers.
To maximise these opportunities, it is important to
have a sound understanding of the concepts and
risks involved. If you have not traded options before,
be sure you understand the risks and rewards of
options trading by consulting with an ASX accredited
derivatives adviser prior to trading. ...
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