ISE-CCM Homeland Security Index

The cash-settled proprietary ISE-CCM Homeland Security Index (HSX) includes companies engaged in contractual work with the Department of Homeland Security, law enforcement agencies, or companies that provide products or services for: intelligence and warning; border and transportation security; domestic counterterrorism; protection of critical infrastructure; defense against catastrophic threats; and, emergency preparedness and response.

The Index comprises 30 balanced, select, small, mid and large capitalization U.S. companies. It is a sampled, fixed-number constituent, modified market capitalization-weighted index that is adjusted for free-float shares. Due to the non-uniform weight distribution across the sector, a “modified” market capitalization-weighted methodology is used to limit individual component weightings. This modification prevents a few large component stocks from dominating the index and distorting an index return that is representative of an industry sector. The modified approach promotes portfolio diversification by retaining the economic attributes of capitalization ranking.

The ISE-CCM Homeland Security Index was jointly developed by ISE and Cronus Capital Markets, Inc. (CCM). CCM, an independent and privately owned capital market research and consulting firm, provides specific research and support for the Index. It is calculated and maintained by Standard & Poor’s based on a methodology developed by ISE and CCM in consultation with Standard & Poor’s.

As of Nov. 1, 2007, there are 31 ISE index options listed.

Contract Overview

Full specifications can be found at the ISE web site.

Trading hours	9:30 A.M. - 4:00 P.M. Eastern Time (New York time).
Expiration months	Four near-term months followed by one additional month from the March quarterly cycle (March, June, September and December).
Strike price intervals	At least $2.50.
Minimum trading increments	The minimum trading increment for an options contract trading at less than $3.00 is $0.05. The minimum trading increment for an options contract trading at $3.00 or higher is $0.10.