Issue of Securities. All arrangements made by an Issuing House, which specialized in this work. The procedure would be probably as follows an evaluation by the Issuing House of the company s financial standing and future prospects an assessment if the finance required, and advise regarding the most appropriate package to finance to meet the need advice of the timing of the issue agreement with the Stock Exchange on the method of issue sale by tender, SE placing etc completion of an underighting agreement preparation of the prospectus and other documents required by the Stock Exchange in the initial application for the quotation advertising the offer for sell and the publication of the prospectus arrangements with the bankers to receive the amounts payable the issue price of the share to be agreed at a level to ensure a success of the issue final application for the Stock Exchange quotation, and signing of the listing agreement, which binds the company to maintain a regular supply of information to the Stock Exchange and shareholders. 5. Equity Share Futures and Options These are traded at the London International Futures and Options Exchange LIFFE, which was established in 1982. Both futures and options are used by investors for hedging i.e. protecting against future capital loss in their investments speculation i.e. gambling on forecasts of favorable movements in future Stock Market prices.
The main differences between futures and options is that futures contracts are binding obligation to buy or sell assets, whereas options convey rights to buy or sell assets, but not obligations.
Futures are agreed, whereas options are purchase.
Equity Share Futures The only equity futures dealt in on LIFFE are those based on the FTSE 100 and MID 250 Stock Indices.
Futures contracts may b used to protect an expected rise in the market before funds are available to an investor.
For example, an investor expecting a large cash sum in three months time could protect his position by buying FTSE 100 Index futures contract now, and selling futures for a higher sum when the market rises. The profit made on the futures position would then compensate him for the higher price he has pay for his investments when the expected cash sum arrives.
Equity Share Options An option is the right to buy or sell something at an agreed price the exercise price within a stated period of time. As applied to shares, a payment a premium is made through or to a stockbroker for a call option, which gives the right to buy shares by a future date or for a put option, which gives the right to sell shares by future date. And the holder may exercise the option, or late it lapse.
However the giver the writer of the option, i. e. the dealer to whom the premium has been paid, is obliged to deliver or buy the shares respectively, if the option holder exercises his rights. Traditional options have been dealt in for over 200 years, and are usually written for a date three month hence, when either the shares are exchanged, or the option lapses. The disadvantage of the traditional option is that it cannot be traded before the exercise date, and it was because of this inflexibility that the traded options market was created in the UK in 1978. Equity options were first traded on LIFFE in 1992, and currently 1997, options are available on 73 large companies shares.
Because traded options cost much less then the underlying shares, an investor is able to back an investment opinion without risking too much money. II. Dividend Policy and Share Valuation 1.