Licensed Dealer in Securities AFS License No: 238699

Date:

Option Trading

Options if used correctly, can provide investors with protection for their share portfolio and an opportunity for higher returns. To do this you need to be fully aware of what options are and how they work. An option is a contract between two parties giving the taker (buyer) the right but not the obligation, to buy or sell a parcel of shares at a predetermined price, on or before a predetermined date. To acquire this right the taker pays a premium to the writer (seller) of the contract.

The types of options available are called call and put options.

A call option gives the taker the right, but not the obligation, to buy the underlying shares at a predetermined price, on or before a predetermined date.

A put option gives the taker the right, but no the obligation, to sell the underlying shares at a predetermined price, on or before a predetermine date. The taker only needs to deliver the underlying shares if they exercise the option.

These may be used individually or they may be combined by the investor to form a variety of trading strategies to cover market expectations.

It is important to note that the purchase and the sale of options involves a risk and may not be suitable for all investors. Investors considering trading in options should ensure that they understand the nature of their rights and obligations and are aware of the risks.

It is recommended that you talk to your advisor to obtain advice about your personal financial situation and suitable of options trading for you.