Options and Lending

What is it?

Options and Lending is a facility suitable for individuals, companies, trusts and Self Managed Super Funds (SMSFs), and is comprised of two core products:

• Protected Loan - an interest-only limited recourse loan where investors can borrow up to 100% of the purchase price to acquire eligible securities. Alternatively, investors can take out a Protected Loan against fully-paid eligible securities they already own¹.
• Options - can be used to reduce the risk of a share portfolio, generate income, or take a leveraged position on a particular security in the hope of increased rewards.

How does it work?

• Protected Loan - Investors initially borrow a lump sum amount that is used to acquire listed Australian securities. At maturity, if the market value of the securities is greater than its protected price, the investor will be entitled to receive this capital growth. Conversely, if the market value is less than its protected price, the investor can sell the securities back to us at their protected price.
• Options - Investors can undertake a variety of options strategies including:
  • Buying Calls
  • Selling Puts
  • Buying Puts
  • Buying Collars¹
  • Selling Calls (covered)¹

What securities are available through the facility?

Investors can choose from up to 70 eligible securities. SMSF applicants can choose from up to 30 eligible securities.

Protected Loan

How is the Protected Loan interest rate set?

The interest rate depends on, among other things, the securities an investor chooses to invest in, the term of the loan, volatility of the securities and market interest rates.

What are the benefits of using a Protected Loan?

The main benefits of a Protected Loan include:

• Ability to borrow up to 100% of the investment amount.
• Each parcel of securities is treated separately, allowing investors to benefit from securities that have increased in value and sell back those that have fallen in value at their protected price.
• Flexibility to determine the portfolio of securities, interest rate type, term and protection level.
• No margin calls.
• Potential tax deductions in relation to interest payments.
• Receipt of dividend income and potential franking credits.

What are the risks of using a Protected Loan?

There are risks associated with a Protected Loan, some of which include:

• The return an investor can earn on the securities in which they invest may be less than the net after tax cost of the loan.
• Investors who borrow less than 100% of the purchase price risk losing some or all of their contributed funds in the event the share price trades below their protected price.

Refer to the Product Disclosure Statement for further information on the risks associated with the Protected Loan.

Other Protected Loan features at a glance:

Who should consider investing in a Protected Loan?

Protected Loans are suitable for individuals, companies, trusts and SMSFs who:

• Want a geared exposure of up to 100% to build a portfolio of Australian securities.
• Want to benefit from any increase in the price of securities and to receive all ordinary dividends and potential franking credits.
• Would like the comfort of knowing that the value of their securities is protected at their chosen level during the term of the loan.
• Are wanting to receive potential tax deductions in relation to interest payments.
• Are seeking to diversify their investments across different market sectors to reduce their overall risk.

Options

Who should consider investing in Options?

Options are available to individuals, companies, trusts and SMSFs and appeal to those who want to:

Other Options features at a glance:

Please refer to the Options and Lending PDS and Client Agreement for more information. There are risks associated with Options trading. Please refer to the PDS for more information on specific and general risks and costs related to Options.


To request a Product Disclosure Statement and Client Agreement, or to find out how to apply for an Options and Lending facility, please contact your adviser or call us on 1800 252 351.

¹ Not available to SMSFs
² Cash settlement applies when the underlying parcel of securities is CBA

This information has been prepared without taking account of the objectives, financial situation or needs of any particular individual. Because of that, before acting on the information in this document, you should consider its appropriateness to your circumstances, having regard to your objectives, financial situation and needs.

Options and Lending is a product of Commonwealth Bank which is administered by its wholly owned but non-guaranteed subsidiary Commonwealth Securities Limited ABN 60 067 254 399 (CommSec), a Participant of the ASX Group. A Product Disclosure Statement (including the Options and Lending Client Agreement) is available for Options and Lending and should be considered before making any investment decision about this product. Bank and Government charges apply. Applications for Protected Loans and Interest in Advance Loans are subject to Commonwealth Bank's normal credit approval. Options and Lending provides sophisticated financial products which may involve dealing in derivatives. Unless you are familiar with derivative dealings and such products, these products may not be suitable for you.