Low Exercise Price Options (LEPOs) may be over either shares or an index. There are currently 47 stocks with LEPOs listed.

Share LEPOs

When you buy a share LEPO you obtain the right to buy:

  • an agreed number of shares (100 shares per contract)
  • at a specified future date
  • in return for the payment of the exercise price (1 cent) and a premium

The seller of a LEPO undertakes to sell the underlying securities at expiry in return for the exercise price and the premium amount the LEPO originally traded at.

LEPOs allow investors to profit from movements in the underlying security on a one-for-one basis. Buying a LEPO is similar to a forward purchase of shares, while selling a LEPO is similar to a forward sale of shares.

Because of their low exercise price, LEPOs trade for large premiums. The high premium exposure carries a risk similar to that of owning the securities outright or, for writers, short selling securities.

An important feature of LEPOs is that both the taker and the writer are margined. When you buy a LEPO you do not pay the full amount of the premium upfront. Instead, you pay or receive margins during the life of the LEPO until the LEPO is closed out or exercised, in which case you pay or receive margins until the scheduled settlement date of the underlying shares and pay or receive the balance of the premium on the scheduled settlement date of the underlying shares.

Contract specifications of share LEPOs


Types available Call
Contract size 100 shares per contract
Exercise price 1 cent per share
Exercise style European
Settlement Deliverable
Expiry Same expiry months as options stock class
Margins Both buyer and seller are margined

Index LEPOs

Contract specifications of index LEPOs

Benefits of LEPOs

The advantages of trading LEPOs include:

  • Leveraged exposure to a stock or index - When you open a LEPO contract you gain exposure to the full value of the underlying securities but actually pay only a fraction of the full premium of the LEPO upfront. This potentially provides a greater return to the investor but also means LEPOs have a higher risk profile.
  • A way to trade declining markets - Selling a LEPO gives you exposure to a decline in the value of the underlying asset, enabling you to profit if the price of the asset falls. The sale of a LEPO can be compared to a short stock position, but the LEPO position can in many cases be established more easily and at lower cost.
  • A cash efficient method of trading - Using a LEPO can be a cost-effective alternative to borrowing to fund a purchase of shares. You have a lower cash outlay for the same level of exposure to the market than with a direct investment in shares.
  • Can use existing credit margins to offset initial cost - Credit margins from existing open positions may be used to reduce the initial margin payable. This can further reduce the cash outlay when opening a contract.
  • No risk of early exercise - LEPOs are European style options, meaning they are only exercisable at expiry. Therefore the seller will not have to be concerned about the possibility of an early exercise.
  • The ability to hedge a physical shareholding  - You can sell a LEPO to protect yourself against a fall in the value of a physical shareholding.