1 International Securities Exchange

2 Steve Meizinger Director of Education ISE Steve Meizinger & Jeff Soule ISEoptions.com

3 ISE Sentiment Index ISEE

4 For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. An investor should review transaction costs, margin requirements and tax considerations with a broker and tax advisor before entering into any options strategy. Options involve risk and are not suitable for everyone. Prior to buying or selling an option, a person must receive a copy of CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS. Copies have been provided for you today and may be obtained from your broker, one of the exchanges or The Options Clearing Corporation. A prospectus, which discusses the role of The Options Clearing Corporation, is also available, without charge, upon request at OPTIONS or Any strategies discussed, including examples using actual securities price data, are strictly for illustrative and educational purposes and are not to be construed as an endorsement, recommendation or solicitation to buy or sell securities.

5 Risk and Reward »Investors should always consider the balance between risk and reward »Each investor must individually decide if the risk of an investment is worth the potential reward »Investment decisions should be based on multiple factors, not just one indicator

6 Free volatility data on all ISE listed options Updates on ISE broad market index products Updates on ISE sector options

7 Traditional Put Call Ratio »Put call ratio was originally made famous by Martin Zweig a famous stock market technician »Theory: Put call ratio reflects the emotional aspect of trading by identifying the degree to which traders feel optimistic or pessimistic about the near-term market direction

8 Definition »The put-call ratio is simply the number of puts traded divided by the number of calls traded. It can be computed daily, weekly, or over any time period. It can be computed for stock options, index options, or ETF options. Some market technicians suspect that a high volume of puts relative to calls indicates investors are bearish, whereas a high ratio of calls to puts shows bullishness.

9 Calculation of original Put Call ratio »Put volume/Call volume on individual equities for a specific company view »Put volume/Call volume on indexes for a broad market view »All trades are included even those by Market Makers, Firms and closing customers

10 ISE Sentiment Index »Call volume/put volume, although only opening customer transactions are included »Closing transactions and Market Maker and Firm transactions are excluded »Can be used for individual securities, ETF’s or indexes

11 ISEE Calculation »Long Calls (non-professional, opening only)/Long Puts (non-professional, opening only) *100 = ISEE

12 Why just customers? »Customer transactions are better indication of market sentiment than market makers and firms »MM’s and firms employ more sophisticated strategies that are designed around neutral market forecasts

13 What does ISEE measure? »Every long call or put traded at ISE is calculated on all products traded at ISE

14 Interpretation of ISEE »> 100 means that more calls are being purchased »< 100 means that more puts are being purchased

15 ISEE Index

16 Functionality »Can query for a specific symbols or scan for the whole market

17 ISEE Select Query Tool

18 ISEE Select Scanning Tool Scan the market from selection of predefined queries

19 Using the ISEE data »Investors can scan the entire market or query for select issues »Each individual investor can select the appropriate time to study the data »ISEE data is calculated on a 10, 20 and 50 day moving average »Data is calculated each 20 minutes although the calculated data is extremely volatile. This should be considered when looking at the calculated sentiment data

20 ISEE recent data »January 22, 2007 »Today closed at 153, up from 139 the previous trading day ( ) »52 week high low »Generally readings greater than one hundred indicate more call buying and readings less than one hundred indicate more put buying

21 ISEE usage »Some market participants believe in this indicator as a contrary indicator, others watch the range of this indicator for possible clues on specific issues or the market as a whole »Your interpretation of ISEE depends on your philosophy towards trends versus extreme readings in the data

22 ISEE article

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24 International Securities Exchange