Special Statement for Uncovered Option Writers Account No. • • - • There are special risks associated with uncovered option writing which expose the investor to potentially significant loss. I understand that this type of strategy may not be suitable for all customers approved for options transactions. I also understand oath of the following: 1. The potential loss of uncovered cell writing is unlimited, since there is no upper limit on a stock's price and the loss to a writer of ar uncovered call equals the stock price minus the exercise price. The writer of an uncovered cal is in an extremely risky position, and may incur large losses if the value of the underlying instrument increases above the exercise price. Such a loss can exceed the equity in the call writer's account. 2. The potential toss 'rpm writing uncovered put options is also substantial. The writer of an uncovered put option bears a risk o' loss if the value of the underlying instrument declines below the exercise price. However. slice stock prices cannot be lower than zero, the maximum loss is equal to the strike price of the put sold less the premium received for that put. Such loss could be substantial if there is a significant dcctino in the value of the underlying instrument end can exceed the equity in the put writer's account. Deutsche Bank Alex.Brown A [rt.. rr al °sue... Bstit Account Name Southern Financial LLC - 3. for combination writing, where the investor writes both a put and a call on the same underlying instrument. the potential risk is unlimited and can exceed the equity in the option writer's account. 4. Uncovered option writing is this suitable only for the knowledgeable investor who understands the risks, has the financial capacity and willingness to incur potentially substantial losses, and has sufficient liquid assets to meet applicable margin requirements. ir this regard. if the value of the underlying instrument moves against an uncovered writer's op