Low Exercise Price Option

LEPO ( Low Exercise Price Options ) are call options with a strike price ( engl: " Exercise Price " ) is very low or close to 0.

Properties

These options write down deeply in the money. The so-called intrinsic value of the option is approximately equal to the value of the underlying asset.

Course and course development of LEPO and Underlying are very similar. Lepos can therefore be used in an investment portfolio instead of the underlying.

A big difference to trading with the underlying assets is the ability to take a writer - position, ie, adopt a so-called short position. This aspect is particularly important for market participants who have no access to securities lending.

Tax Treatment

For tax is for income from LEPOs under German tax law not to income from capital assets (§ 20 Income Tax Act) but contracts pursuant to § 23 (1 ), 4 Income Tax Act.

Within the framework of the EU Savings LEPO a sign (or withholding ) is obligatory, if the underlying is a single bond paper.

• Option trading