For more up-to-date information on options on the Russell 2000 (RUT), please visit http://www.cboe.com/rut/

RUT is the symbol for options based on the Russell 2000 (RUT) Index, a leading benchmark for the performance of small-capitalization stocks. Options on the Russell 2000 have a $100 multiplier, so that, for example, if the Russell 2000 price is at 480, an investor might consider hedging a $48,000 small-cap portfolio with one RUT option.

The Russell 2000 Index was created in 1984 by Frank Russell Company and was designed to track the performance of small-cap companies. RUT options, trading exclusively at the Chicago Board Options Exchange®, make it simple to participate in the small-cap market.

The popularity of the Russell 2000 as a small-cap benchmark leads to four fundamental reasons for using RUT options:

Investors are able to trade a broad market by making one RUT trading decision rather than making the many decisions involved with investing in numerous individual stocks.

Russell 2000 options offer a convenient and easy way to help reduce the market risk of a broad market portfolio of many small-cap stocks, without disrupting the make-up of the portfolio.

RUT option purchasers risk only the premium they pay for the option. The risk is both known and limited.

Purchasing RUT options, instead of buying or selling thousands of individual stocks, provides an investor with an additional opportunity to use investment capital elsewhere. For a relatively small percentage gain in the underlying index, a DJX option can increase in value by a multiple of that gain, assuming the correct option series was selected.

The "January effect" refers to the phenomenon in which many securities, and particularly stocks of smaller companies, have enjoyed higher rates of return in January than in any other month. The effect was first suggested in 1942, and widely publicized in the past 25 years by scholarly articles and a popular book entitled The Incredible January Effect: The Stock Market's Unsolved Mystery, by Robert A. Haugen and Josef Lakonishok. From 1926 through 1989, the smallest 10% of all stocks (or "10th decile") beat the rest of the market by an average of 9.4 percentage points in the month of January. Perhaps due in part to publicity and anticipation of the effect, the effect weakened slightly in the 1990s, but small stocks still outperformed by an annual average of 5.8 percentage points.

Some evidence suggests that, in the past decade, some investors might have purchased small-capitalization stocks in December in anticipation of the January effect - for example, the price of the Russell 2000 (RUT) index of small-cap stocks rose in every December from 1987 to 2000.

For an example of how options on the Russell 2000 (SPX) Index can be used in light of the January effect, please click on:
Bullish - Russell 2000 Calls and January Effect BU.5

For more information on some of the many ways in which listed options can help you manage your equity portfolio, please visit:
http://www.cboe.com/strategies/
http://www.cboe.com/protection

Symbol:
RUT

Underlying:
The Russell 2000® Index is a capitalization-weighted index of domestic equities traded on the NYSE, AMEX and NASDAQ. The index represents the bottom 2,000 companies from a universe of the 3,000 largest stocks in the U.S. It is considered a benchmark of the U.S. small-capitalization market. Shares are adjusted for cross- ownership. The index composition is adjusted once per year ([June) to reflect changes in rankings and shares outstanding. The component stocks are weighted according to the total market value of their outstanding shares. The impact of a component's price change is proportional to the issue's total market value, which is the share price times the number of shares outstanding. These are summed for all 2,000 stocks and divided by a predetermined base value. The base value is adjusted to reflect changes in capitalization resulting from mergers, acquisitions, stock rights, substitutions, etc.

Multiplier:
$100.

Strike Price Intervals:
5 points.

Strike (Exercise) Prices:
In-, at- and out-of-the-money strike prices are initially listed. New series are generally added when the underlying trades through the highest or lowest strike price available.

Premium Quotation:
Stated in decimals. One point equals $100. Minimum tick for options trading below 3.00 is 0.05 ($5.00) and for all other series, 0.10 ($10.00).

Expiration Date:
Saturday immediately following the third Friday of the expiration month.

Expiration Months:
Generally, up to three near term months plus up to three additional months from the March quarterly cycle (March, June, September and December).

Exercise Style:
European - Russell 2000 Index options generally may be exercised only on the last business day before expiration.

Settlement of Option Exercise:
The exercise-settlement value, RLS, is calculated using the first (opening) reported sales price in the primary market of each component stock on the last business day (usually a Friday) before the expiration date. If a stock in the index does not open on the day on which the exercise-settlement value is calculated, the last reported sales price in the primary market will be used in calculating the exercise-settlement value. The exercise-settlement amount is equal to the difference between the exercise-settlement value and the exercise price of the option, multiplied by $100. Exercise will result in delivery of cash on the business day following expiration.

Position and Exercise Limits:
The aggregate position and exercise limits for Russell 2000 Index options and LEAPS are 50,000 contracts on the same side of the market with no more than 30,000 in the near-term month. (10 RUT LEAPS are equivalent to 1 RUT option contract.) An index option hedge exemption for public customers may be available for certain diversified portfolios, which may expand the position limit up to an additional 75,000 contracts. In addition, proprietary accounts of member organizations may receive an exemption up to 100,000 contracts for the purpose of facilitating public customer orders. The exercise limit is the same as the position limit.

Margin:
Purchases of puts or calls with 9 months or less until expiration must be paid for in full. Writers of uncovered puts or calls must deposit / maintain 100% of the option proceeds* plus 15% of the aggregate contract value (current index level x $100) minus the amount by which the option is out-of-the-money, if any, subject to a minimum for calls of option proceeds* plus 10% of the aggregate contract value and a minimum for puts of option proceeds* plus 10% of the aggregate exercise price amount. (*For calculating maintenance margin, use option current market value instead of option proceeds.) Additional margin may be required pursuant to Exchange Rule 12.10.

CUSIP Number:
124835

Last Trading Day:
Trading in Russell 2000 Index options will ordinarily cease on the business day (usually a Thursday) preceding the day on which the exercise-settlement value is calculated.

Trading Hours:
8:30 a.m.- 3:15 p.m. Central time (Chicago time).

For more information on Russell 2000 Index Options, please see this pamphlet or visit
http://www.cboe.com/rut.

Jack L. Hansen, CFA
Senior Portfolio Manager and Principal
The Clifton Group
Minneapolis, MN

For more up-to-date information on options on the Russell 2000 (RUT), also please visit http://www.cboe.com/rut/