Russell 1000® Value Index Options

The Russell 1000® Value Index (ticker RLV) measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values.

LARGE CONTRACT SIZE

RLV options have a large notional size with $100 multiplier; approximately ten times larger than iShares Russell 1000 Value Index fund (IWD) options. This may permit commissions cost savings based upon the number of contracts needed to attain the same notional exposure.

CASH SETTLEMENT, EUROPEAN-STYLE EXERCISE

With European-style exercise, there is no risk of early assignment such as for dividends; and cash settlement means there is no unwanted delivery or assignment of shares.

MARGIN

Cboe Regulatory Circular RG15-183 notes that Cboe rules allow a short position in a cash-settled-index option established and carried in a margin account to receive covered margin treatment, if the short option position is offset in the same account by an equivalent position in an index-tracking ETF that is based on the same index that underlies the short option(s).

In order to receive covered margin treatment, the market value of the offsetting ETF position must be equivalent or exceed the current aggregate index value of the option being covered. One should note that not all ETFs are managed so as to maintain a share price that is a constant fraction (e.g., 1/10 th, 1/100 th, 1/1,000 th, etc.) of the index being tracked.

TAX TREATMENT

Under section 1256 of the Tax Code, profit and loss on transactions in certain exchange-traded options, including RLV options, are entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss, provided that the investor involved and the strategy employed satisfy the criteria of the Tax Code*

INDEX PRODUCT

RLV Options - AM-settled on 3rd Fridays

*Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Tax laws and regulations change from time to time and may be subject to varying interpretations.