ITEM PF12 - ANNEX 2
PENSION FUND COMMITTEE – 29 AUGUST 2003DERIVATIVESFUTURES, OPTIONS AND SWAPS
TRADED OPTIONS – TECHNICAL DETAILS
Size of contract – 1000 shares
Period - 3, 6 or 9 months, but 3 months is by far the most popular contract. There are four different three months cycles for contracts and each company whose shares are subject to traded options is given a particular cycle. The cycles are January, April, July, October – February, May, August, November – March, June, September, December.
However, options on the FTSE index expire on the third Friday of March, June, September and December, as with futures contracts.
Margin - There is no standard margin. It is calculated for each security on a risk analysis basis.
Straddles - These are ‘call’ and ‘put’ options written (issued) or bought at the same time at the same striking price.
Size
of loss - The maximum loss is the premium if the option is
not exercised.
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