Special Statement for Uncovered Option Writers Deutsche Bank Alex. Brown A Cleo *an If ()hooch* BI Scum.tina Inc Account No. ___11.4G025098 Account Name Southern Trust Company Inc. There are special risks associated with uncovered option writing whichgexpose theinvestor 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 each of the following: 1. The potential loss of uncovered call writing is unlimited, since there is no upper limit on a stock's price and the loss to a writer of an uncovered call equals the stock price minus the exercise price. The writer of an uncovered call 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 loss from writing uncovered put options is also substantial. The writer of an uncovered put option bears a risk of loss if the value of the underlying instrument declines below the exercise price. However, since stock prices cannot be lower than zero, the maximum loss is equal to the stnke price of the put sold less the premium received for that put. Such loss could be substantial if there is a significant decline in the value of the underlying instrument and can exceed the equity in the put writer's account. 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 wnting is thus suitable only for the knowledgeable investor who understands the risks. bas the fir andel capacity and willingness to incur potentially substantial losses, and has sufficient liquid assets to meet applicable margin requirements. In this regard, if the value of the underlying instrument moves against an un