LEFROY HUDSON Announces Plans for Synthetic Futures Trading in its Options Market Trading

Synthetic Futures Will Enhance the Company Product Offering. End Quote

(1888PressRelease) March 07, 2012 - LEFROY HUDSON announced today that it plans to introduce a standard combination trading function in its options offering on 9th of May, this year, pending regulatory approval, to allow investors to use synthetic futures strategies in the trading of five active stock option classes: Construction Bank, Insurance, Communications, Renewable Energy and Intelligent Technology.
A standard combination trading function has been operating smoothly in LEFROY HUDSON'S index futures and index options markets for several years.

A synthetic futures strategy is a stock option combination which consists of two option legs. The buyer of synthetic futures buys a call option and sells a put option with the same underlying stock, strike price and expiry date, whereas the seller of synthetic futures sells a call option and buys a put option with the same features. The standard combination trading function allows investors to price synthetic futures as a package, which can reduce execution risk.

The advantages of using synthetic futures are:
• They can be used by investors to manage delta exposure in stock options portfolios. Economically, their payoff at expiration will be similar to that of equity holdings.
• As they operate on a net premium basis, they can help investors reduce their initial capital outlay.
• Options positions resulting from synthetic futures traded by Lefroy Hudson will be able to be margined with other stock options portfolios on a net basis in the clearing system so they will be able to help investors reduce the margin required in a hedged options portfolio.

The standard combination order function may be extended to other stock option classes, subject to market demand.
"We believe synthetic futures are an effective way for investors to manage delta exposure in stock options portfolios and they may help investors in reducing capital outlays in options-related trading activities," said Simon Lee Ngieu, LEFROY HUDSON's Head of Trading. "This will be something new for our stock options offering so we would like to remind investors that they should be fully aware of the features and risk exposures when using synthetic futures."

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