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Options are contracts that give the holder the right, but not the obligation, to buy or sell shares of an underlying security at a pre-established price for a set period of time. Investors often use them to hedge an existing investment. By purchasing options, an investor has the potential opportunity to earn profits while limiting his or her risk of loss. Of course, an options purchaser may lose the entire amount committed to options in a relatively short period of time. An option is part of a class of securities called derivatives, so named because these securities derive their value from the worth of an underlying instrument. Although options can be used to hedge an existing investment, options can also expose the investor to potentially significant risks.
In order to trade options, you must complete an Option Agreement and Approval Form, which you can obtain from your Wachovia Securities Financial Advisor, or by calling Wachovia Securities Direct at (800) 326-4434. Based on the answers you provide, you may be assigned an option trading level that allows you to place certain types of option trades. For details about trading level requirements or the types of option transactions that can be entered at each level, please contact your Financial Advisor or call Wachovia Securities Direct.
Options involve risk and are not suitable for all investors. Before opening an option position, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document are available by calling (800) 326-4434. Please read it carefully before investing.
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