Priced based options are used by investors to speculate on or to hedge against a change in Treasury securities’ prices. As interest rates change, the prices of Treasury securities will move in the opposite direction. Interest rates and bond prices are inversely related to each other. An investor who believes that interest rates are likely to rise would purchase price based puts or sell price based calls. Alternatively, an investor who believes that rates are likely to fall will purchase price based calls or sell price based puts. Priced based options on Treasury notes and bonds are based on a $100,000 par amount of a specific Treasury note or bond. Price based options on Treasury bills are based on $1,000,000 par value. Price based options, when exercised, will result in the delivery of the specific security.

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