AMEX LAUNCHES TRADING IN CAPPED INDEX OPTIONS ON THE MAJOR MARKET INDEX (XMI) AND THE INSTITUTIONAL INDEX (XII)
AMEX LAUNCHES TRADING IN CAPPED INDEX OPTIONS ON THE
MAJOR MARKET INDEX (XMI) AND THE INSTITUTIONAL INDEX (XII)
NEW YORK, Nov. 14 /PRNewswire/ -- The American Stock Exchange today launched trading in put and call capped index options based on its flagship Major Market Index (XMI) and the Institutional Index (XII).
A new style of options, the Amex's capped index options provide opportunities for investors to benefit from upward or downward movements in the XMI and XII index levels to a pre-determined "cap price". Cap prices are currently set at 20 point levels above (for calls) and below (for puts) an option's strike price. By offering pre-determined cap price levels, the risks to both buyers and sellers of the new options are reduced.
A unique feature of capped index options is "automatic exercise." This feature ensures that the capped options are exercised automatically on the very first day the underlying index closes at or above (for a call) or at or below (for a put) the option's cap price. Automatic exercise also allows buyers of capped options that have reached the cap price -- the maximum level of profitability -- to receive their full profit immediately.
"The Amex's new capped options offer investors a simple way to use certain option strategies at a more affordable price. These options also provide new ways to enhance returns and reduce risk," said American Stock Exchange Chairman James R. Jones.
Capped options, because of pre-determined cap price levels, allow buyers to know in advance the full extent of their potential profit. Similarly, sellers of the options know the maximum extent of their risk exposure which is limited by the cap price.
In most respects, a capped index option is the equivalent of a vertical index option spread (a position created by the purchase of one option and the sale of a second option on the same underlying index with the same expiration).
Major Market Index capped options (ticker symbol "XMB") opened with a strike price of 325. Institutional Index capped options (ticker symbol "XIB") opened with a strike price of 410.
The initial expiration month for both XMB and XIB is March, 1992. Additional expirations will be listed every two months.
The Amex trades a total of 248 stock options, including 64 options on over-the-counter stocks. In addition, options are traded on four broad market indexes -- the Major Market Index (XMI), the LT-20 Index (XLT), the Institutional Index (XII) and the Japan Index (JPN) -- as well as two industry-based indexes -- the Oil Index (XOI) and the Computer Technology Index (XCI). The Exchange also trades 22 long-term options on leading stocks which have expirations up to almost three years.
/CONTACT: Shelly E. Wolfe of Ameican Stock Exchange, 212-306-1641/ CO: American Stock Exchange ST: New York IN: FIN SU: PDT SH -- NY055 -- 4411 11/14/91 11:55 EST