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The errata listed below should be taken into account for this particular reading:

Measuring Investment Returns of Portfolios Containing Futures and Options


As of 1 November 2009

P. 30, Table 2: The physical market value of stocks should be 1,016,000. All other values
in the table are correct.

P. 30, Table 3: The heading of the rightmost column should be Notional Income.

The corrected tables are shown below; Table 1 has no corrections but it shown for
convenience:
Table 1: Physical Impact of Notional
Market Value Futures Market Value
Stocks 1,000,000 +200,000 1,200,000
Cash 400,000 -200,000 200,000
Total 1,400,000 0 1,400,000

Table 2: Physical Impact of Notional


Market Value Futures Market Value
Stocks 1,016,000 +205,000 1,221,000
Cash 405,000 -205,000 200,000
Total 1,421,000 0 1,421,000

Table 3: Income Impact of Notional


Received Futures Income
Stocks 4,000 +1,200 5,200
Cash 2,400 -1,200 1,200
Total 6,400 0 6,400

Pp. 31-32, Tables 4, 5, and 6: The heading of the middle column of values should be
Impact of Options.

P. 32, first paragraph, the phrase from $100 to $110 should be deleted, the sentence
should read, Also, [assume] that the value of the option increases from $4 to $9.50 as
the price of the XYZ Corp. stock increases, and also Income of $260 should be
Income of $276.

P. 32, Table 5: The value for Stock Options in the Impact of Options column should be
9,500.

P. 32, Table 6: The values in the Impact of Options column should be Stocks +276 and
Cash 276, reflecting the re-allocation of income on the beginning cash underlying the
options position. The calculation is 46,000 x 0.006 = 276. Consequently, the values in
the column headed Notional Market Value should be Stocks 4,276 and Cash 2,100.

The corrected tables are shown below:


Table 4: Physical Impact of Notional
Market Value Options Market Value
Stocks 1,000,000 +50,000 1,050,000
Stock Options 4,000 -4,000 0
Cash 396,000 -46,000 350,000
Total 1,400,000 0 1,400,000

Table 5: Physical Impact of Notional


Market Value Options Market Value
Stocks 1,016,000 +66,000 1,082,000
Stock Options 9,500 -9,500 0
Cash 396,000 -56,500 339,500
Total 1,421,500 0 1,421,500

Table 6: Income Impact of Notional


Received Options Income
Stocks 4,000 +276 4,276
Stock Options 0 0 0
Cash 2,376 -276 2,100
Total 6,376 0 6,376

The corresponding return calculations in the right-hand column of p. 32 should be:

1,082,000 1,050,000 + 4,276 10,500


Notional Stock Return = = 2.45%
1,050,000

339,500 350,000 + 2,100 (10,500)


Notional Cash Return = = 0.60%
350,000
The Notional Cash Flow of 10,500 is the difference of 56,500 46,000.