HARTLEY POYNTON LIMITED

1. HARTLEY POYNTONLIMITED STOCKBROKERS AND PROFESSIONAL WEALTH MANAGERS

2. How to Double your Income from Bluechip Shares using Options Matthew Yourell & Ian Keys Investment Advisors Hartley Poynton

3. Options Strategy • Introduction • What is an option? - Dispelling the Myth • Advantages of options • Selling options for cash flow • Outlining the Strategy • How to get started

4. Writing Options against shares you already own or plan to purchase can be one of the simplest and most rewarding strategies ASX Explanatory Booklet, “Understanding Options Trading”

5. Introduction

6. Introduction • In a volatile market where share prices are moving up and down, there is an opportunity to gain additional income from the stocks that you hold through writing options • This is a disciplined strategy designed to grow your portfolio • Value adding • Professionally managed to leave you time for the things that you want to do

7. What is an Option? “Gives the right to the purchaser to pay an agreed price for the underlying stock on or before an agreed date” Example - a $5.50 February Call Gives the purchaser of the call the right to Buy your shares for $5.50 on or before the end of February.

8. Uses for Options • Options can be used for a variety of reasons: • leverage (purely speculative) • Insurance (buying the right to purchase or sell in the future at a predetermined price) • Hedging (protection for existing stocks) • Income(selling options on existing stock)

9. How is an Option Priced? Rise in: Option Price • Time to Expiry () • Market Volatility () • Price of Underlying Share ()

10. Time Value Time $$$ 1/3 Time $ 2/3 Time $ Jan 1 Jun 30 Dec 31 Time

11. WMC

12. Advantages of Writing Call Options • Reducing down side risk on shares held • Multiple dividends on assets - cash flow • Taking advantage of volatile markets • Cumulative effect of regular income reinvesting prior to payment of tax

13. Cumulative effect of reinvesting

14. Disadvantages • Places a temporary limit on capital appreciation • trading secure cash flow for capital gain • when can you be exercised? • Need to watch shares and make monthly decisions • more onerous than buy and forget but not demanding • major reason for using a full service broker

15. Why use a Full Service Broker? • Co-ordination of share and option trades • Discussion of strategies with specialist with access to up to date information • Professional management of your funds with full reporting and accounting functions • Financial advice (as required)

16. Refreshment Break

17. Selling options for cash flow • Two methods: • leverage your purchase of shares • no leverage • Depends on attitude to borrowing and individual risk profile

19. Handout - Writing Covered Calls

20. Example Buy 1000 CWO shares at $3.91 = $3910 then Sell 1 CWO Feb $4.00 call option at $0.15 = $150 If at end of Feb CWO shares are less than $4.00 then profit = 150 / 3910 = 3.8% for the month If at end of Feb CWO shares are greater than $4.00 then sell shares at $4.00 with a profit of $90 + $150 = $240 therefore profit is 240 /3910 = 6.1% for the month N.B. All calculations are before transaction costs

21. Strategy - Portfolio Sector No of Shares Price Cost AMP 2000 $18.68 $37,750 WBC 5000 $13.20 $66,700 CWO 10000 $ 3.93 $39,725 NCP 2000 $18.20 $36,800 WMC 5000 $ 7.03 $35,530 Total cost $216,505

22. Options Income Share No Strike Premium Amount AMP 2000 Feb 1900 45c $800 WBC 5000 Feb 1350 23c $1050 CWO 10000 Feb 400 15c $1400 NCP 2000 Feb 1900 72c $1340 WMC 5000 Feb 725 16c $700 Total month premium $5290 (5290 / 216500 = 2.44%)

23. Why doesn’t everyone do it ??? • Relatively unknown - only about 5% of brokers qualified to trade this strategy • Not glamourous • Requires disciplined approach • Lack of understanding of benefits

24. How to Get Started • Minimum level for starting $50-100,000 (can build up to it with managed funds etc) • Arrange meeting or call to discuss individual circumstances and assess tolerance to risk • Develop an investment plan to meet needs (including overall portfolio mgmt) • Open accounts

25. Questions ??

26. Conclusion • What is an option? - Dispelling the Myth • Advantages of options • Selling options for cash flow • Outlining the Strategy • How to get started

27. Handouts • Hartley Poynton Brochure • Advisor note - Writing Covered Calls • ASX - Understanding Options • Copy of Presentation • Extract from AFR - Option Prices • Information Request Form (2 mins to Questions)

28. DISCLAIMER The securities representative and Hartley Poynton Limited advise that they are persons associated with them may receive commissions, fees or other benefits or advantages as a result of a transaction arising from any securities recommendation contained in this document, but that such commissions, fees or other benefits or advantages (if any) are within normally accepted industry levels. Hartley Poynton Limited advises that any securities recommendation contained in this document is provided by way of unsolicited general information only and accordingly, you should not act on such recommendation without first consulting your investment advisor in order to ascertain whether that recommendation is appropriate having regard to your investment objectives, financial situation and particular needs. Hartley Poynton Limited believes that the information and advice (including any securities recommendation) contained in this document is accurate as as the time and date of issue. However, Hartley Poynton Limited provides no warranty of accuracy or reliability in relation to any advice or information contained in this document and to the extent permitted by law accepts no implied (including responsibility to any person by reason of negligence) is accepted by Hartley Poynton Limited or any officer, agent or employee of Hartley Poynton Limited.