"Options are key tools in helping us implement our investment philosophy. Our Tactical Option Program (TOP) is an option-based overlay strategy designed with the goal of adding incremental value to the underlying investment portfolio, particularly during the non-turbulent periods of the market cycle. And our analysis suggests that options often give us a big reduction in trading costs compared with trading in underlying markets."

Robert D. Arnott
Research Affiliates, LLC


"Client portfolios are most often hedged using the standard and FLEX index options on the S&P and Russell 2000 indexes. Exchange-traded contracts provide further benefit in that they satisfy client counterparty risk concerns."

Jack L. Hansen
The Clifton Group


"In managing portfolios for institutional clients, options have helped dramatically in our efforts to fulfill our goals of gaining exposure, adding income and controlling portfolio risk."

Charlie Jacklin,
Mellon Capital Management


"Our firm has been managing reduced-risk accounts hedged with S&P index options for more than 15 years..."

Walter Sall,
Gateway Investment Advisers



Comments from Portfolio Managers
Since 1983 listed options have been used for investment or risk management purposes by a number of portfolio management firms on behalf of clients such as pension funds, mutual funds, endowments, and foundations.

Here are comments on the uses and benefits of listed options from a number of portfolio management firms:

Topics Covered
Here are the topics covered on the video. Click on any topic to to view the video In RealVideo high-bandwidth streaming format. In order to listen to/view this file, you will need the RealPlayer 8, available Free from RealNetworks. Read the instructions below to obtain your copy.

  A. Introduction (19.8MB)
B. Hedging (11.7MB)
C. Investing (5.09MB)
D. Asset Allocation (5.4MB)
E. Overwriting and Overlay (5.2MB)
F. Globalization (9.3MB)
G. High-net-worth Investors (7.9MB)
H. Lower Transaction Costs (6.3MB)
I. Prudence and High Credit Rating (6.6MB)
J. Conclusion (8.4MB)
K. Appendix on Basics of Options (45.6MB Note: This file size is very large.)


Four portfolio managers from firms with combined assets of more than $30 billion are featured on this video:


Jack L. Hansen
The Clifton Group

Rob Arnott
First Quadrant

Greg McMurran
Analytic Investors

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Options involve risk and are not suitable for all investors. Prior to buying or selling options, a person must receive a copy of Characteristics and Risks of Standardized Options, which is available from The Options Clearing Corporation, One North Wacker Dr., Suite 500, Chicago, IL 60606, or by calling 1-888-OPTIONS.

Please note that futures on the CBOE Volatility Index® (VIX®) were introduced in 2004 after the methodology for VIX was changed; please visit www.cboe.com/vix for volatility updates that might not be reflected on this CD-ROM.

This discussion is designed to assist individuals in learning how options work and in understanding various options strategies. This discussion is for educational purposes only and is not intended to provide investment advice. Commissions, taxes and transaction costs generally are not included in the strategy discussions, but can affect final outcome and should be considered. Please contact a tax advisor for the tax implications involved in these strategies.
This discussion has been prepared solely for informational purposes, based upon information generally available to the public from sources believed to be reliable, but no representation or warranty is given with respect to its accuracy or completeness. No statement herein should be construed as a recommendation to buy or sell a security or to provide investment advice. Any profit/loss diagrams refer only to approximate results at expiration. Past performance is no guarantee of future results.

S&P 100® and S&P 500® are registered trademarks of the McGraw-Hill Companies, Inc., and are licensed for use by the Chicago Board Options Exchange, Inc. ("CBOE"). The Russell 2000® Index is a registered trademark of Frank Russell Company. The Nasdaq 100® is a registered mark of The Nasdaq Stock Market, Inc. "Dow Jones SM", "Dow Jones Industrial AverageSM", "Dow Jones Transportation AverageSM," and "Dow Jones Utility AverageSM" are service marks of Dow Jones & Company, Inc. and have been licensed for certain purposes by the CBOE. iSharesSM is a servicemark of Barclays Global Investors. The Goldman Sachs Technology Indexes are the property of Goldman, Sachs & Co. and have been licensed to the CBOE in connection with the trading of options based upon the indexes. Dow Jones & Co., The Nasdaq Stock Market, Goldman Sachs, and McGraw-Hill make no warranties and bear no liability in regard to the trading of index options.VIX®, CBOE Volatility Index® LEAPS®, FLEX®, FLexible EXchange® and OEX® are registered trademarks and Long-term Equity AnticiPation SecuritiesTM and SPXTM are trademarks of the Chicago Board Options Exchange, Inc.

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Copyright © Chicago Board Options Exchange, Inc. 2005. All rights reserved.