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+604 Part V: Index Options and Futures 
+Or, thinking in the alternative, if the index triples, then the structured produc1 
+(before adjustment factor) would be triple its initial price, or 30. Then 30 x 91.25o/c 
+== 27.375. 
+This example begins to demonstrate just how onerous the adjustment factor is. 
+Notice that if the underlying doubles, you don't make "double" less 8.75% (the 
+adjustment factor). No, you make "double" times the adjustment factor - 17.5% -
+less than double. In the case of tripling, you make 3 x 8.75%, or 26.25%, less than 
+triple (i.e., the structured product is worth 27.375, not 30, so the percentage increase 
+was 173. 75%, not 200% - a difference of 26.25%, stated in terms of the initial invest­
+ment). How can that be? It is a result of the adjustment factor being applied to the 
+$SPX price before your profit (cash settlement value) is computed. 
+THE BREAK-EVEN FINAL INDEX VALUE 
+Before discussing the adjustment factor in more detail, one more point should be 
+made: The owner of the structured product doesn't get back anything more than the 
+base value unless the underlying has increased by at least a fixed amount at maturi­
+ty. In others words, the underlying must appreciate to a price large enough that the 
+final price times the adjustment factor is greater than the striking price of the struc­
+tured product. We'll call this price the break-even final index value. 
+An example will demonstrate this concept. 
+Example: As in the preceding example, suppose tl1at the striking price of the struc­
+tured product is 1,100 and the adjustment factor is 8.75%. At what price would the 
+final cash settlement value be something greater than the base value of 10? That 
+price can be solved for with the following simple equation: 
+Break-even final index value== Striking price/ (1- Adjustment factor) 
+= 1,100 / (0.9125) == 1,205.48. 
+Generally speaking, the underlying index must increase in value by a specific 
+amount just to break even. In this case that amount is: 
+1 / (1 -Adjustment factor) = 1 / 0.9175 = 1.0959 
+In other words, the underlying index must increase in value by more than 9.5% 
+by maturity just to overcome the weight of the adjustment factor. If the index increas­
+es by a lesser amount, then the structured product holder will merely receive back 
+his base value ( 10) at maturity. 
+The previous examples all show that the adjustment factor is not a trivial thing. 
+At first glance, one might not realize just how burdensome it is. After all, one might