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Notice

Self Regulatory Organizations; Chicago Board Options Exchange, Inc.; Order Approving Proposed Rule Change and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 2 to the Proposed Rule Change Relating to the Expansion of the Equity Hedge Exemption From Position and Exercise Limits

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Information about this document as published in the Federal Register.

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Start Preamble March 27, 2002.

Correction

In FR Document No. 02-07327, beginning on page 14751 for Wednesday March 27, 2002, paragraph (iv) in column 3 on page 14751, which describes the collar hedge strategy, was incorrectly stated by the Chicago Board Options Exchange (“CBOE”).[1] The paragraph should read as follows:

(iv) Collar (sell call/buy put, neither in-the-money when established with the same expiration where the strike price of the short call equals or exceeds the Start Printed Page 15643strike price of the long put/buy stock).[2] A collar strategy provides downside protection by the use of put option contracts and finances the purchase of the puts through the sale of short call option contracts. The goal of this strategy is to bracket the price of the underlying security at the time the position is established. For example, assume that the price of an underlying equity, XYZ, is $53 and account ABC is long 5000 shares of XYZ at $53. Account ABC sells 50 XYZ April 55 calls and purchases 50 XYZ April 50 puts. Under the collar exemption, one collar (i.e., one short call, and one long put) must be hedged with 100 shares of the underlying security to remain exempt.

Additionally, neither side of the short call, long put position can be in-the-money at the time the position is established.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[3]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

1.  Telephone conversation between Patricia L. Cerny, Director, Department of Market Regulation, CBOE, and Susie Cho, Special Counsel, Division of Market Regulation, Commission, March 26, 2002.

Back to Citation

[FR Doc. 02-7867 Filed 4-1-02; 8:45 am]

BILLING CODE 8010-01-P