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AM Securities Broker/Dealer Index XBD

The XBD measures the performance of highly capitalized companies in the U.S. securities broker/dealer industry. Included are those companies that provide securities brokerage services, market making, U.S. Treasury Primary Dealer and other functions dealing with U.S. and international securities.

The XBD is an equal-dollar-weighted index, ensuring that each of its component securities is represented in approximate equal-dollar value. The weighting was established by the closing prices of component stocks on October 15, 1993 and designated the number of shares that totaled a value of $10,000 (e.g., a $20/sh stock would be represented by 500 shares). The total value of the stocks was reduced by a divisor to establish the index benchmark value of 300.00. Adjustments are made quarterly, on the third Friday of January, April, July and October, to make sure each stock continues to maintain equal market value in the index.

An industry sector index affords investors the opportunity to participate in market trends without having to research and select specific stocks or groups of stock. A market sector index is a simpler, more efficient measure of movement within a given industry. A contract within a market sector index affords investors to focus efforts on overall market movement rather than the risks behind a specific stock.

Sector indices will reflect movement within their given markets to the extent their member companies represent the given industry. A sector index is "benchmarked" against the value at which it was originally set and will typically be altered at least once per year to maintain an accurate representation.

Options are traded on a given index and are settled in cash, unlike equity options which are settled in stock. The assigned writer (seller) is obligated to pay the exercising holder (buyer) the difference between the closing value of the underlying index and the exercise (strike) price of the option, multiplied by the specified index multiplier (usually $100). Basically, a multiplier of 100 in a sector index means that for every point a sector option is "in the money," there is an incremental $100 of intrinsic value.

Symbol Company
(BSC) Bear Stearns Companies, Inc.
(LEH) Lehman Brothers Holdings, Inc.
(DLJ) Donaldson, Lufkin & Jenrette, Inc.
(MER) Merrill Lynch & Co., Inc.
(MWD) Morgan Stanley, Dean Witter & Co.
(AGE) A.G. Edwards, Inc.
(PWJ) Paine Webber Group Inc.
(HQ) Hambrecht & Quist Group, Inc.
(RJF) Raymond James Financial, Inc.
(LM) Legg Mason, Inc.
(SCH) Charles Schwab Corporation


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