The VIX Strategy Workshop is a collection of discussion pieces designed to assist individuals in learning how options work and in understanding VIX options strategies. These discussions and materials are for educational purposes only and are not intended to provide investment advice.

Investment decisions should not be made based upon worksheet outcomes.

Access to, or delivery of a copy of, the Options Disclosure Document must accompany this worksheet.

Example: The Cboe Volatility Index (VIX) is at 48.00 on weaker stock markets. VIX was trading under 40 less than 1 week ago.

Outlook: You expect VIX to fall on steadier markets and are looking for a low cost trade.

Possible strategy: Out-of-the-money Bear Put Spread

Buy 1 February 45 put at 3.60

Sell 1 February 40 put at 1.60

Net cost of 2.00 or \$200.00.

*All values shown are at the time of expiration. Commissions and other trading fees not included.

Index ChangeVIX @ expirationLong 45 put valueShort 40 put valueSpread ValueSpread CostNet Profit/(Loss)
+4.17%50\$0.00\$0.00\$0.00(\$200.00)(\$200.00)
+/-0.00%48*\$0.00\$0.00\$0.00(\$200.00)(\$200.00)
-6.25%45**\$0.00\$0.00\$0.00(\$200.00)(\$200.00)
-10.42%43***\$200.00\$0.00\$200.00(\$200.00)\$0.00
-16.67%40****\$500.00\$0.00\$500.00(\$200.00)\$300.00
-27.08%35\$1,000.00\$500.00\$500.00(\$200.00)\$300.00

At Expiration:

• *Unchanged:Loss of \$200.00
• **Maximum Loss:\$200.00 if VIX > or = 45 (-6.25%)0
• ***Break-even:VIX at 43.00 (-10.42%)
• ****Maximum Gain: \$300.00 if VIX < or = 40 (-16.67%)

In Summary: Purchase an out-of-the-money put spread for a cost of \$200.00 (maximum risk) and with a maximum profit potential of \$300 as a low cost trade to benefit from lower market volatility. Risk / reward ratio of 1 to 1.5