IMPORTANT INFORMATION

The Position Simulator is not to be construed as an offer or the solicitation of an offer to buy or sell options or other securities, or as a recommendation of specific investments or investment strategies.

Options involve risk, and are not suitable for all investors. Every Investor who uses options should read and understand the publication 'Characteristics and Risks of Standardized Options'. A copy of this publication is included within The Options Investigator. If you do not already have a copy in pamphlet form, a copy may be obtained from your broker or by calling The Options Industry Council at 1-888-OPTIONS.

The Position Simulator is designed for educational purposes only. The purpose of this program is to provide you a tool for developing a basic understanding of option pricing - what the factors that affect an option's price are, and how a change in any one (or more) of them may affect that price. This program should not be used for making investment trading decisions or for arbitrage trading.

The Position Simulator is generally based upon the Cox-Ross-Rubinstein binomial approximation to the Black-Scholes option pricing model. While this and other approximations of the Black-Scholes model are the most popular models used for option pricing, other models exist that consider different factors. No model can be entirely accurate.

AMERICAN - STYLE: The Simulator uses a mathematical formula to calculate 'theoretical values' of Call and Put options given seven inputs supplied by the user. This formula assumes the option being valued is an American-style contract (exercisable on any day prior to expiration).

DATE: The Simulator will read your computer's clock for the current calendar date each time you are using the calculator. An accurate current date is necessary as input for the mathematical formula to generate reliable option values. Therefore, make sure your computer knows what day it is, and that 'Today's Date' visible on the face of the calculator is accurate.

DIVIDEND: This program assumes that if an equity option's underlying stock pays a cash dividend it is paid in discrete amounts and at discrete intervals. The calculator will ask for and accept a quarterly cash dividend amount and the next ex-dividend date. Further, this model will assume that each subsequent cash dividend will be the same amount, and that subsequent ex-dividend dates will occur at 3 calendar month intervals. Cash dividend amounts and/or ex-dividend dates may be obtained by consulting your broker, from certain financial publications, from the exchange on which the stock is traded, or from the underlying company itself.

VOLATILITY: Volatility has a significant influence on the price of an option contract. Small variations in these estimates can result in significantly different prices. It is important to understand that during any trading day the consensus among traders and investors on an estimate of future market or a specific stock's volatility is dynamic, and can change frequently and abruptly. Therefore, it is highly likely that prices you generate with The Simulator will not resemble prices found in the marketplace.

LEAPS: The Simulator is designed to price LEAPS (long-term options that can expire up to three years from the time they are first listed and/or issued) in addition to conventional option contracts (which generally have a lifetime of no more than 9 months). When pricing LEAPS with this tool, the user should note that a change in the underlying dividend amount and/or interest rate factors can have a more pronounced effect on the resulting theoretical value than with shorter-term conventional option contracts.