EFTA01353456.pdf

that an option writer will be assigned an exercise that is made based on news that is published after the estab- lished exercise cut-off time and that the writer may not have an effective remedy to compensate for the viola- tion of the options markers rules. 10. If a trading market in an option should become unavailable, or if the writers of the option are otherwise unable to engage in closing transactions, the writers of that option would remain obligated until expiration or assignment. See the discussions in paragraphs 2 and 3 under "Other Risks" below. 11. A sudden development may cause a sharp up- ward or downward spike in the value of the interest underlying a capped option. Such a spike could cause the capped option to be automatically exercised, and writers of the option to become obligated to pay the cash settlement amount, even if the effect of the devel- opment on the value of the underlying interest com- pletely disappears on the day after the automatic exercise is triggered. OTHER RISKS 1. Transactions that involve buying and writingsnulti- pile options in combination, or buying or writing op- tions in combination with buying or selling short the underlying interests, present additional risks to inves- tors. Combination transactions. such as option spreads, are more complex than buying or writing a single option. And it should be further noted that, as in any area of investing, a complexity not well understood is, in itself, a risk factor. While this is not to suggest that combination strategies should not be considered, it is advisable, as is the case with all investments in op- tions, to consult with someone who is experienced and knowledgeable with respect to the risks and potential rewards of combination transactions under various market circumstances. The investor considering strategies involving combi- nation transactions should recognize several other risk-related considerations in addition to those already mentioned: the fact that it may at times be impossible simultaneously to execute transactions in all of the options involved in the combination, the difficulty that may be involved in attempting to execute simultane- ously two or more buy or sell orders at the desired prices, the possibility that a loss could be incurred on 67 CONFIDENTIAL - PURSUANT TOEFEEKIMCS0M828 P. 6(e) CONFIDENTIAL SDNY_GM_00184012 EFTA01353456