Bond Options (Carries)

An Option is a financial instrument giving the purchaser the right (without the obligation) to buy/sell an asset at a predetermined price at a certain date in the future. To obtain the right the purchaser agrees to pay a premium, this can be compared to an insurance premium. Note

Benefits

• JSE Bond Options are Future Style Options as they are Bond Futures and follow the same margining process
• Options can be traded by both retail and institutional investors
• Investors can trade Call Options (right to buy) and Put Options (right to sell) on the underlying
• The buyer of the Option is not obligated to exercise the Option
• All YieldX Options are European style Options. Research has demonstrated that it is suboptimal to exercise early.
• Options are margined to reduce the risk of default and SAFCOM becomes the counterparty to every trade

Who should use this product?

• Investors who need more time to decide whether or not they want to buy or sell a bond
• Investors wanting to protect their current interest rate exposure against falling or rising rates
• Investors who do not have the funds available immediately to purchase a Spot Bond.
• Investors looking to earn extra returns on their existing portfolios

How to use this product?

• To protect the value of your bonds
• To earn additional returns
• As a speculative tool
• Allows an investor more time to decide on purchase/sale of bonds.