Options Trading

The Appel companies may utilize index option contracts as a tool to increase equity holdings or as a hedge against long positions. Call options are contracts providing the right to buy 100 shares of a security at a specific strike price by the expiration date. Put options are contracts to sell 100 shares at a given price.

Option trading is found to be useful for several reasons:

1. Financial liability is limited to the cost of the option, a fraction of the cost of the underlying security;
    

2. Leverage is utilized.  Small percentage gains in underlying securities produce sizable percentage gains in option values;
    

3. Downside protection is provided against market swings;
    

4. Options provide a risk protection mechanism. Option contracts identify an exact profit zone, are time-sensitive and totally liquid. The holder of an option contract can exit any time prior to expiration date.