Differences From Standard Options
Several important differences distinguish LEPOs from standard exchange-traded options, and these differences have important implications for the pricing of LEPO.
- The buyer of a LEPO does not pay the full amount of the premium upfront.
- Both buyer and seller of LEPOs involve ongoing margin payments.
- The buyer of a LEPO does not receive dividends or obtain voting rights on the underlying shares until the shares are transferred after exercise.
- LEPOs are only available as call options.
- LEPOs have a very low exercise price and a high premium close to the initial value of the underlying shares.
- LEPOs have only one exercise price per expiry month.
LEPOs may be over either shares or an index.
Read more about this topic: Low Exercise Price Option
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