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One of the key components in the Company’s ability to pay a high yield is its approach to selling options over part of its investment and trading portfolio. This generates current income from the option premium Djerriwarrh receives for selling the options.

The amount that the Company receives from selling options depends on a number of factors:

  • level of volatility in share price anticipated for the underlying stock
  • level of the option exercise price and particularly how far it is from the current share price.
  • time to expiry, i.e. how far the option has to run.
  • level of interest rates, the lower interest rates are, other things being equal, the lower the option premium received.
  • the percentage of the portfolio over which we are prepared to sell options.

In an environment where the Company believes the market is more likely to rise, then we would tend to have a lower level of the portfolio covered by options to give the company more exposure to any lift in the capital value of our investments.