612 Part V: Index Options and Futures 
Hence, even though the Internet index is at 525 - far above the equivalent cal 
price of 375 - the structured product is expected to be trading at a price well belo\\ 
its maximum price of 25. 
Figure 32-5 shows the values over a broad spectrum of prices and for various 
expiration dates. One can clearly see that the structured product will not trade"near 
its maximum price of 25 until time shrinks to nearly the maturity date, or until the 
underlying index rises to very high prices. In particular, note where the theoretical 
values for the bull spread product lie when the index is at the higher striking price of 
375 (there is a vertical line on the chart to aid in identifying those values). The struc­
tured product is not worth 20 in any of the cases, and for longer times to maturity, it 
isn't even worth 15. Thus, the call feature tends to dampen the upside profit poten­
tial of this product in a dramatic manner. 
The curves in Figure 32-5 were drawn with the assumption that volatility is 
50%. Should volatility change materially during the life of the structured product, 
then the values would change as well. A lower volatility would push the curves up 
toward the "at maturity" line, while an increase in volatility would push the curves 
down even further. 
FIGURE 32-5. 
Value of bull spread structured product. 
At Maturity 
25 
1 Year Left 
20 3Years Left 
15 
5 
100 150 200 250 300 350 400 450 500 550 600 
Price of Index