EFTA01355783.pdf

Special Statement for Deutsche Bank Alex.Brown Uncovered Option Writers A [rt.. rr al °sue... Bstit Account No. Account Name Southern Financial LLC - •• - • There are special risks associated with uncovered option writing which expose the investor to potentially significant loss. I understand that this type of strategy may not be suitable for all customers approved for options transactions. I also understand oath of the following: 1. The potential loss of uncovered cell writing is unlimited, since there is no upper limit on a stock's price and the loss to a writer of ar uncovered call equals the stock price minus the exercise price. The writer of an uncovered cal is in an extremely risky position, and may incur large losses if the value of the underlying instrument increases above the exercise price. Such a loss can exceed the equity in the call writer's account. 2. The potential toss 'rpm writing uncovered put options is also substantial. The writer of an uncovered put option bears a risk o' loss if the value of the underlying instrument declines below the exercise price. However. slice stock prices cannot be lower than zero, the maximum loss is equal to the strike price of the put sold less the premium received for that put. Such loss could be substantial if there is a significant dcctino in the value of the underlying instrument end can exceed the equity in the put writer's account. 3. for combination writing, where the investor writes both a put and a call on the same underlying instrument. the potential risk is unlimited and can exceed the equity in the option writer's account. 4. Uncovered option writing is this suitable only for the knowledgeable investor who understands the risks, has the financial capacity and willingness to incur potentially substantial losses, and has sufficient liquid assets to meet applicable margin requirements. ir this regard. if the value of the underlying instrument moves against an uncovered writer's options position, the investor's broker may request significant additional margin payments. If an investor does not make such margin payments, the broker may liquidate stock or options positicns in the investor's account, with little or no prior notice in accordance with the investor's margin agreement. 5. The option writer may not be able to rely on the secondary market. If a secondary market in options were to become unavailable, investors could not engage in closing transactions, and an option writer would remain obligated until expiration or assignment. B. The writer of ar American-style option is subject to being assigned an exercise at any time after he has written the option until the option expires. Bycontrest, the writer of a European-style option is subject to exercise assignment only during the exercise pined. NOTE: It is expected that the person(s) signing below will read the booklet entitled Characteristics and Risks of Standardized Options available from your broker. Particular attention is directed to the chapter entitled "Risks of Buying and Writing Options." This statement is nor intended to enumerate allot the risks entaiied in writing uncovered options. I have read and understand the above statement regarding the special risks associated with uncovered option writing end represent that such trading is suitable in light of my investment objectives, which include speculation, as wee es my financial situation, risk tolerance end knowledge. I understand thatyou will rely on the representations I have made herein and in the Option Agreerne t end Approval Form I provided to you in determining whether to approve my account for the options strate s have el cted-and I hereby certify the truth and accuracy of such statements. ti9 fag 1/3 Signed:4 !Dative Signed . Date Signed Date Signed Date Signed Date Approved for. recovered Puts ROP/Manager Approval: Date: 03-014.9-0,26 OA ILA aim' CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0041059 CONFIDENTIAL SDNY_GM_00187243 EFTA01355783