Actionable trade ideas for stock market investors and traders seeking alpha by overlaying their portfolios with options, other derivatives, ETFs, and disciplined and applied Game Theory for hedge fund managers and other active fund managers worldwide. Ryan Renicker, CFA

1. January 31, 2006
Equity Volatility Snapshot
Ryan Renicker, CFA • Short-dated implied volatility for the Energy sector is relatively high, even though S&P 500 implied
1.212.526.9425 volatility has retraced from its recent spike.
ryan.renicker@lehman.com
Devapriya Mallick
• Within the Energy sector, we find OIH short-term and forward risk expectations are abnormally
1.212.526.5429
dmallik@lehman.com high relative to the XLE. Moreover, OIH skew is trading rich versus XLE skew.
• Lehman U.S. Strategy team recommends overweighting OIH versus XLE. Both are currently trading
at all-time highs. An efficient way of expressing this view with options is to write puts on the OIH
versus buying puts on the XLE.
• We update our Volatility Screen to identify stocks possibly having rich or cheap options. We also
update our Earnings Watch to estimate the expected stock price reaction the options market is
pricing in for upcoming earnings releases.
Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report.
Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them,
where such research is available. Customers can access this independent research at www.lehmanlive.com or can call 1-800-2LEHMAN to request a copy of this research.
Investors should consider this report as only a single factor in making their investment decision.
PLEASE SEE ANALYST(S) CERTIFICATION AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 7.

2. Equity Derivatives Strategy | Equity Volatility Snapshot
Equity Market Fear Subsides, However . . .
The past two weeks have witnessed a dramatic increase, and subsequent decline in risk expectations
th
for the broad equity market. During the week ending January 20 , 1-month at-the-money (ATM) implied
volatility spiked to almost 13%, largely in response to the predominately earnings-driven market sell-off.
However, risk expectations have since reverted, as the market rallied last week on the back of solid
earnings and forecasts (despite the lower than anticipated Q4 GDP figure released Friday) and SPX 1-
month ATM implied volatility currently trades at about 11%.
. . . Escalating Risk Expectations for Energy Sector
Implied Volatility Relatively High
However, the Energy sector’s implied volatility remains relatively high. As Figure 1 illustrates, 3-month
ATM implied volatility for the Oil Service HOLDRs Trust (OIH) and the Philadelphia Oil Service Index
(OSX), relative to S&P 500 implied volatility, are particularly high. Both have had substantial gains
during the past 12 months, with returns of about 77% and 73% respectively (S&P 500 12-month return
about 9%). 3-month ATM implied volatility for the Energy Select Sector SPDR Fund (XLE) and the AMEX
Natural Gas Index (XNG) are relatively high as well, but have been on a downward trend since
reaching their 12-month high in mid November.
OIH, XLE Correlation vs. Crude Continues to Climb
We also find Energy sector returns have become increasingly correlated1 with crude oil returns. In
addition, these correlations have increased as oil prices have increased, particularly since September
2003, when the energy bull market began in earnest (Figure 2). This phenomenon occurred for both
the OSX and XLE, even though the XLE includes several integrated oil companies (XOM, CVX, COP:
combined weighting in XLE roughly 35%), despite these companies’ exposure to downstream and
chemicals operations, where earnings tend to be less correlated with changes in crude oil prices.
Figure 1: Energy Implied Volatility High vs. S&P 500 Index Figure 2: OSX, XLE Return Correlation vs. Crude Oil
25% 80% 80
OIH OSX Correl
Rolling 90-Day Rtn. Correlation w / Crude
Oil Service Sector 70%
XLE XLE Correl 70
3-Month Sector - SPX IVOL Spread
Risk Expectations Soar
OSX 60% Crude
20% XNG 60
50%
Crude Oil Price
50
40%
15% 30% 40
20% z
30
10%
10% 20
0%
10
-10%
5% -20% 0
5
5
05
5
5
5
5
5
5
6
5
05
05
0
1
2
3
4
5
0
1
2
3
4
5
6
-0
-0
r-0
-0
-0
-0
l-0
0
0
0
l-0
l-0
l-0
l-0
l-0
l-0
0
0
0
0
0
0
0
g-
n-
n-
n-
p-
-
ay
ar
ct
ov
b
n-
n-
n-
n-
n-
n-
n-
ec
Ju
Ap
Au
Ja
Ju
Ja
Fe
Ju
Ju
Ju
Ju
Ju
Ju
Se
O
M
M
Ja
Ja
Ja
Ja
Ja
Ja
Ja
N
D
Source: Lehman Brothers, OptionMetrics Source: Lehman Brothers, Bloomberg
1
We calculate rolling 90-day correlations using the daily log returns for each ETF/Index vs. those for crude oil prices.
January 31, 2006 2

3. Equity Derivatives Strategy | Equity Volatility Snapshot
OIH Risk Expectations Relatively High vs. XLE
Buying Downside Protection as Energy Rallies
As Figure 3 illustrates, the 3-month 20-delta put – call skew2 for both the XLE and OIH have increased
relatively dramatically since May 2005, an indication of investor demand for downside protection for
their long positions in the XLE and OIH.
However, during the past 3 months, demand for downside protection has continued to accelerate for
the OIH, yet decline for the XLE, even though both have continued to rally. From this, we infer that the
options market is becoming more risk averse toward the OIH versus the XLE. Although the OIH is
fundamentally expected to be more volatile than the XLE (e.g. the investor base in integrated oil
companies tends to have longer-term investment horizons), we believe the current divergence in implied
volatility skew is abnormal.
OIH Forward Implied Volatility Relatively High
In Figure 4, we highlight the degree to which the option market is pricing in future short-term risk
expectations (specifically, 3-month forward at-the-money implied volatility, in 9 months’ time) for the
OIH and XLE. Our findings suggest future short-term risk expectations for the OIH have steadily
increased during 2005. On the contrary, forward volatility for the XLE has remained relatively stable.
Investment Strategy
The Lehman Brothers U.S. Equity Strategy team is currently recommending investors to overweight the
OIH relative to an XLE underweight within the broader Energy sector, as they believe the Oil Services
industry (OIH) should benefit from significant capital expenditure in energy infrastructure to meet the
growing demand for energy through 2007. Please see ETF Monitor, U.S. Strategy, January 27, 2006
for further details. Investors believing the OIH will outperform the XLE should consider taking advantage
of the OIH’s relatively “rich” skew and implied volatility versus that of the XLE by writing puts on the
OIH versus buying puts on the XLE.
Figure 3: Buying Put Protection During OIH Rally, Yet Not for XLE? Figure 4: Future Risk Expectations High for OIH, Not XLE
6%
35%
Expected 3M ATM IVOL, in 9 Month's Time
OIH
XLE
20 Delta Put / Call Skew (5D Moving Avg.)
5%
OIH Forward Risk Expectations Rising
30%
For XLE, Relatively Stable
4%
25%
3%
Investors Purchasing Downside
Protection for OIH?
2%
20%
1% OIH Forward Vol (9m-12m)
XLE Forward Vol (9m-12m)
15%
0%
05
06
5
05
05
05
5
l-0
-0
5
5
05
5
5
5
5
05
05
06
5
05
5
v-
n-
g-
p-
c-
-0
-0
r-0
-0
-0
-0
l-0
-0
ct
Ju
g-
n-
n-
n-
No
p-
Ja
ay
Au
Se
De
ar
ct
ov
b
ec
Ju
Ap
O
Au
Ja
Ju
Ja
Fe
Se
O
M
M
N
D
Source: Lehman Brothers, OptionMetrics Source: Lehman Brothers, OptionMetrics
2
We calculate the 20-delta put – call skew by subtracting the at-the-money 3-month 20-delta call implied volatility from
the 3-month 20-delta put implied volatility.
January 31, 2006 3

4. Equity Derivatives Strategy | Equity Volatility Snapshot
Lehman Brothers Volatility Screen
We update the list of stocks identified by the Lehman Brothers Volatility Screen as possibly having rich
or cheap options. This screen allows investors to identify potentially rich or cheap one or three month
options to efficiently express directional views on the underlying stock or identify attractive long or short
volatility trading candidates. Please see Identifying Rich and Cheap Implied Volatility (December 20,
2005) for further details.
In Figure 5, we present the current list of stocks having relatively rich options according to the Lehman
Brothers Volatility Screen.
Figure 5: Stocks Displaying “Rich” Volatility Characteristics
Std Devs from Std Devs from Std Devs from
Lehman Expected 3-Month
Lehman Mean (3-Month Mean (3-Month Mean (3-Month
Ticker Name GICS Sector Company Price Earnings Implied Rich/Cheap
Sector View Implied vs Implied vs Implied vs S&P
Rating Date Volatility
Realized) Sector) 500)
AAPL APPLE COMPUTER INC Information Technology 2-Equal weight 2-Neutral 75.00 4/13/2006 47% 1.8 1.2 1.5 Rich
ALEX ALEXANDER & BALDWIN INC Industrials 0-Unrated 0-Unrated 52.72 2/1/2006 29% 2.6 1.9 2.1 Rich
ALL ALLSTATE CORP Financials 1-Overweight 1-Positive 52.19 1/31/2006 20% 1.1 2.5 2.6 Rich
AMH AMERUS GROUP CO Financials 1-Overweight 2-Neutral 61.00 2/1/2006 23% 1.4 1.3 1.5 Rich
BCR BARD (C.R.) INC Health Care 0-Unrated 0-Unrated 64.45 4/19/2006 24% 1.6 1.7 2.2 Rich
BEC BECKMAN COULTER INC Health Care 0-Unrated 0-Unrated 59.71 2/17/2006 30% 1.1 2.6 2.6 Rich
BKH BLACK HILLS CORP Utilities RS-Rating Suspe2-Neutral 35.32 2/7/2006 23% 2.0 2.0 1.9 Rich
BLC BELO CORPORATION-A Consumer Discretionary 0-Unrated 0-Unrated 22.80 2/9/2006 33% 4.5 4.1 6.7 Rich
BLI BIG LOTS INC Consumer Discretionary 0-Unrated 0-Unrated 13.45 2/23/2006 38% 1.3 1.4 1.4 Rich
BSX BOSTON SCIENTIFIC CORP Health Care 1-Overweight 1-Positive 20.90 2/1/2006 47% 3.0 4.5 4.6 Rich
CAKE CHEESECAKE FACTORY (THE) Consumer Discretionary 2-Equal weight 2-Neutral 36.54 2/7/2006 30% 2.2 2.0 2.4 Rich
CEY CERTEGY INC Information Technology 1-Overweight 2-Neutral 43.36 4/21/2006 30% 2.0 1.4 1.6 Rich
DBD DIEBOLD INC Information Technology 0-Unrated 0-Unrated 37.01 1/31/2006 29% 1.2 1.9 2.4 Rich
EAS ENERGY EAST CORPORATION Utilities 0-Unrated 0-Unrated 24.73 2/10/2006 22% 1.4 1.9 2.1 Rich
EXC EXELON CORP Utilities 1-Overweight 3-Negative 56.72 4/25/2006 24% 2.3 1.7 1.6 Rich
FISV FISERV INC Information Technology 3-Underweight 2-Neutral 44.79 4/21/2006 26% 1.4 3.0 2.5 Rich
FLR FLUOR CORP Industrials 2-Equal weight 2-Neutral 87.70 3/1/2006 28% 1.3 1.1 1.4 Rich
FPL FPL GROUP INC Utilities RS-Rating Suspe3-Negative 41.64 4/26/2006 19% 1.0 1.2 1.4 Rich
GOOG GOOGLE INC-CL A Information Technology 1-Overweight 2-Neutral 426.82 1/31/2006 48% 1.6 1.2 1.2 Rich
HPQ HEWLETT-PACKARD CO Information Technology 1-Overweight 2-Neutral 31.28 2/16/2006 31% 1.5 2.1 2.4 Rich
JP JEFFERSON-PILOT CORP Financials RS-Rating Suspe2-Neutral 57.61 2/6/2006 25% 4.4 4.4 4.4 Rich
LEA LEAR CORP Consumer Discretionary 3-Underweight 3-Negative 25.96 4/21/2006 49% 1.4 2.4 2.3 Rich
LTR LOEWS CORP Financials 0-Unrated 0-Unrated 99.12 2/10/2006 20% 1.6 1.5 1.6 Rich
MI MARSHALL & ILSLEY CORP Financials 2-Equal weight 2-Neutral 42.10 4/12/2006 18% 2.2 2.2 2.0 Rich
MYG MAYTAG CORP Consumer Discretionary 0-Unrated 0-Unrated 17.05 2/3/2006 53% 1.7 2.1 2.3 Rich
OKE ONEOK INC Utilities 1-Overweight 2-Neutral 28.03 2/22/2006 24% 1.6 1.4 1.6 Rich
PCL PLUM CREEK TIMBER CO Financials 0-Unrated 0-Unrated 37.90 4/25/2006 22% 2.5 1.6 1.7 Rich
PD PHELPS DODGE CORP Materials 1-Overweight 1-Positive 162.10 1/31/2006 42% 1.0 2.2 2.6 Rich
RE EVEREST RE GROUP LTD Financials 1-Overweight 1-Positive 100.02 4/18/2006 25% 1.5 3.4 3.2 Rich
SAFC SAFECO CORP Financials 1-Overweight 1-Positive 53.52 4/19/2006 22% 1.9 2.3 2.3 Rich
TRB TRIBUNE CO Consumer Discretionary 3-Underweight 3-Negative 29.22 2/1/2006 24% 1.2 1.8 1.8 Rich
VRX VALEANT PHARMACEUTICALS INTHealth Care 0-Unrated 0-Unrated 17.86 2/24/2006 79% 2.9 3.6 3.6 Rich
WFSL WASHINGTON FEDERAL INC Financials 3-Underweight 1-Positive 23.95 4/20/2006 21% 1.1 1.0 1.3 Rich
Source: Lehman Brothers, OptionMetrics, Bloomberg, FAME
Note: This screen does not exclude stocks with illiquid options. Investors should consider liquidity before entering into an options position. Stocks that appear as unrated are either
not covered by Lehman Brothers fundamental analysts or are currently subject to research restrictions. Our universe includes stocks included in either the S&P 500 or the NDX.
In Figure 6, we provide the current list of stocks having relatively cheap options according to the
Lehman Brothers Volatility Screen.
Figure 6: Stocks Displaying “Cheap” Volatility Characteristics
Std Devs from Std Devs from Std Devs from
Lehman Expected 3-Month
Lehman Mean (3-Month Mean (3-Month Mean (3-Month
Ticker Name GICS Sector Company Price Earnings Implied Rich/Cheap
Sector View Implied vs Implied vs Implied vs S&P
Rating Date Volatility
Realized) Sector) 500)
ACS AFFILIATED COMPUTER SVCS-A Information Technology 1-Overweight 2-Neutral 62.77 4/21/2006 23% -3.0 -2.0 -1.2 Cheap
ATK ALLIANT TECHSYSTEMS INC Industrials 2-Equal weight 1-Positive 77.31 2/2/2006 18% -1.1 -2.2 -1.4 Cheap
CA COMPUTER ASSOCIATES INTL INCInformation Technology 2-Equal weight 1-Positive 27.73 5/26/2006 22% -1.1 -1.5 -1.1 Cheap
CI CIGNA CORP Health Care 2-Equal weight 1-Positive 119.25 2/8/2006 23% -1.1 -1.6 -1.1 Cheap
CMS CMS ENERGY CORP Utilities 2-Equal weight 3-Negative 14.58 2/23/2006 21% -1.8 -1.9 -1.7 Cheap
FFIV F5 NETWORKS INC Information Technology 1-Overweight 2-Neutral 63.00 4/20/2006 45% -1.5 -1.4 -1.1 Cheap
HON HONEYWELL INTERNATIONAL INCIndustrials 2-Equal weight 1-Positive 38.03 4/20/2006 20% -1.2 -2.7 -1.3 Cheap
HPC HERCULES INC Materials 0-Unrated 0-Unrated 11.55 2/2/2006 28% -1.9 -1.7 -1.1 Cheap
LRCX LAM RESEARCH CORP Information Technology 1-Overweight 1-Positive 46.86 4/13/2006 35% -1.6 -1.6 -1.0 Cheap
PKI PERKINELMER INC Health Care 0-Unrated 0-Unrated 22.78 4/27/2006 26% -1.6 -1.8 -1.7 Cheap
PLCM POLYCOM INC Information Technology 1-Overweight 2-Neutral 19.25 4/20/2006 33% -3.2 -2.8 -1.8 Cheap
PWR QUANTA SERVICES INC Industrials 0-Unrated 0-Unrated 13.77 3/10/2006 39% -1.5 -1.2 -1.0 Cheap
RTN RAYTHEON COMPANY Industrials 2-Equal weight 1-Positive 41.62 2/2/2006 15% -1.2 -1.8 -1.1 Cheap
SMTC SEMTECH CORP Information Technology 2-Equal weight 1-Positive 19.20 3/1/2006 33% -3.1 -2.4 -1.7 Cheap
Source: Lehman Brothers, OptionMetrics, Bloomberg, FAME
Note: Acquisition targets with very low volatility have been removed from this list. Stocks that appear as unrated are either not covered by Lehman Brothers fundamental analysts or
are currently subject to research restrictions. Our universe includes stocks included in either the S&P 500 or the NDX.
January 31, 2006 4

5. Equity Derivatives Strategy | Equity Volatility Snapshot
Earnings Watch: Companies Reporting 1/24 – 1/30
We incorporate implied volatility information to ascertain the expected stock price reaction priced in
by the options market for upcoming earnings announcements. Please see Options Strategy Monthly:
th
Low Volatility in the 7 Inning? (January 10, 2006) for further details.
In Figure 7, we present this week’s edition of the Earnings Watch.
Figure 7: Expected Absolute Stock Price Reactions to Upcoming Earnings Announcements
Average Absolute Stock Price Average Stock Price Move
Expected Implied 1-day Stock
Ticker Name Price (1/23/06) Move Following Earnings Following Earnings
Earnings Date Price Move
Announcements Announcements
ACE ACE LTD 31-Jan-06 54.96 1.8% 2.0% 1.7%
ALL ALLSTATE CORP 31-Jan-06 52.19 3.1% 1.3% -0.4%
AW ALLIED WASTE INDUSTRIES INC 31-Jan-06 9.11 2.1% 7.2% -1.3%
CB CHUBB CORP 31-Jan-06 94.94 1.6% 2.4% 1.5%
CFC COUNTRYWIDE FINANCIAL CORP 31-Jan-06 34.25 4.5% 3.5% -1.1%
CHIR CHIRON CORP 31-Jan-06 44.99 1.1% 1.9% 0.8%
HLT HILTON HOTELS CORP 31-Jan-06 25.29 2.0% 1.5% -1.0%
ITW ILLINOIS TOOL WORKS 31-Jan-06 88.53 1.2% 2.0% -1.1%
K KELLOGG CO 31-Jan-06 43.68 2.5% 2.0% 0.2%
NAV NAVISTAR INTERNATIONAL 31-Jan-06 27.30 4.1% 5.4% -1.4%
NI NISOURCE INC 31-Jan-06 20.25 1.0% 1.2% -0.3%
SYMC SYMANTEC CORP 31-Jan-06 18.19 7.1% 5.6% -2.7%
VMC VULCAN MATERIALS CO 31-Jan-06 72.50 2.9% 1.3% -0.1%
BA BOEING CO 01-Feb-06 69.03 1.7% 1.4% 0.7%
BUD ANHEUSER-BUSCH COS INC. 01-Feb-06 42.01 2.5% 1.3% -0.8%
DUK DUKE ENERGY CORP 01-Feb-06 28.37 1.6% 1.8% 0.5%
EQR EQUITY RESIDENTIAL 01-Feb-06 42.45 2.1% 1.2% -1.1%
HCA HCA INC 01-Feb-06 49.25 2.0% 1.6% 0.3%
JDSU JDS UNIPHASE CORP 01-Feb-06 3.12 6.2% 8.3% -4.6%
MBI MBIA INC 01-Feb-06 62.68 1.8% 1.9% 0.7%
MNST MONSTER WORLDWIDE INC 01-Feb-06 43.60 5.6% 4.1% -2.0%
PBI PITNEY BOWES INC 01-Feb-06 42.52 2.2% 1.0% 1.0%
PCAR PACCAR INC 01-Feb-06 74.42 2.0% 2.2% -0.2%
PHM PULTE HOMES INC 01-Feb-06 39.79 1.8% 4.2% 2.3%
PNW PINNACLE WEST CAPITAL 01-Feb-06 42.52 0.6% 0.9% -0.8%
PPL PPL CORPORATION 01-Feb-06 29.72 1.0% 1.7% 0.7%
SBUX STARBUCKS CORP 01-Feb-06 31.87 3.3% 3.3% 2.0%
SUN SUNOCO INC 01-Feb-06 96.21 1.3% 1.6% 0.3%
TRB TRIBUNE CO 01-Feb-06 29.22 1.8% 2.1% -0.1%
XEL XCEL ENERGY INC 01-Feb-06 19.28 2.9% 1.0% 0.4%
AGN ALLERGAN INC 02-Feb-06 115.78 2.4% 3.8% 0.0%
APCC AMERICAN POWER CONVERSION 02-Feb-06 24.01 6.3% 12.0% -1.4%
AVP AVON PRODUCTS INC 02-Feb-06 28.17 4.3% 6.7% -0.2%
CLX CLOROX COMPANY 02-Feb-06 58.13 2.0% 2.7% -1.5%
CMCSA COMCAST CORP-CL A 02-Feb-06 27.81 2.0% 2.7% -1.6%
CVS CVS CORP 02-Feb-06 27.86 4.0% 3.5% 2.8%
EC ENGELHARD CORP 02-Feb-06 40.55 1.4% 2.5% 0.7%
EFX EQUIFAX INC 02-Feb-06 38.15 0.2% 2.6% 1.4%
EOG EOG RESOURCES INC 02-Feb-06 83.42 1.9% 2.7% 0.5%
EOP EQUITY OFFICE PROPERTIES TR 02-Feb-06 31.67 2.7% 1.4% -0.4%
ERTS ELECTRONIC ARTS INC 02-Feb-06 56.35 3.7% 4.9% -0.3%
GR GOODRICH CORP 02-Feb-06 39.58 2.6% 4.3% -1.3%
GTW GATEWAY INC 02-Feb-06 2.76 2.6% 9.0% -1.7%
HOT STARWOOD HOTELS & RESORTS 02-Feb-06 61.58 1.6% 2.7% 0.5%
HPC HERCULES INC 02-Feb-06 11.55 1.6% 2.9% -0.9%
MEDI MEDIMMUNE INC 02-Feb-06 33.26 0.9% 3.3% 1.9%
ROH ROHM AND HAAS CO 02-Feb-06 50.81 1.8% 2.9% 1.4%
RTN RAYTHEON COMPANY 02-Feb-06 41.62 1.4% 1.5% 0.6%
SLE SARA LEE CORP 02-Feb-06 18.37 1.4% 3.3% -0.7%
SNA SNAP-ON INC 02-Feb-06 39.95 2.0% 3.1% 1.8%
STA ST PAUL TRAVELERS COS INC/TH 02-Feb-06 46.25 2.2% 2.3% 0.9%
TMO THERMO ELECTRON CORP 02-Feb-06 33.34 1.1% 3.8% -1.4%
TSG SABRE HOLDINGS CORP-CL A 02-Feb-06 24.54 1.6% 4.8% 1.1%
TXU TXU CORP 02-Feb-06 50.90 4.0% 4.1% 0.2%
TYC TYCO INTERNATIONAL LTD 02-Feb-06 26.53 0.8% 4.2% -1.0%
AES AES CORP 03-Feb-06 17.00 2.2% 3.9% 1.2%
MCO MOODY'S CORP 03-Feb-06 64.50 1.8% 2.3% -0.6%
R RYDER SYSTEM INC 03-Feb-06 44.43 2.0% 2.7% 0.7%
WEN WENDY'S INTERNATIONAL INC 03-Feb-06 58.75 2.8% 2.8% 0.0%
WHR WHIRLPOOL CORP 03-Feb-06 81.20 2.5% 3.1% -0.2%
WY WEYERHAEUSER CO 03-Feb-06 70.38 1.5% 2.3% -1.1%
DIS THE WALT DISNEY CO. 06-Feb-06 25.46 1.5% 3.4% 1.0%
HAS HASBRO INC 06-Feb-06 21.34 1.8% 1.7% -1.4%
HUM HUMANA INC 06-Feb-06 56.40 3.7% 3.7% 1.2%
LPX LOUISIANA-PACIFIC CORP 06-Feb-06 29.41 4.0% 4.6% 1.4%
NBR NABORS INDUSTRIES LTD 06-Feb-06 82.31 2.2% 2.7% 1.0%
PFG PRINCIPAL FINANCIAL GROUP 06-Feb-06 47.73 1.9% 2.5% -0.4%
SPG SIMON PROPERTY GROUP INC 06-Feb-06 83.00 0.9% 1.9% 1.9%
TIN TEMPLE-INLAND INC 06-Feb-06 46.69 3.3% 1.4% 0.6%
YUM YUM! BRANDS INC 06-Feb-06 49.74 2.9% 3.3% 1.2%
Source: Source: Lehman Brothers, Bloomberg
Note: This list does not exclude illiquid options. Investors should consider liquidity of options before entering a trade. For details on the methodology we use to calculate the implied
stock price move, please see “Earnings Impact on Implied and Realized Volatility”, included in the Options Strategy Monthly, January 10, 2006.
January 31, 2006 5

6. Equity Derivatives Strategy | Equity Volatility Snapshot
Volatility Screen User Interface
Obtain Implied Volatility
Analytics for an
Individual Stock
Screen Universe for
Rich/Cheap Volatility, By
Sector, Analyst Rating,
Earnings Period
Implied and Realized Volatility Implied and Realized Rich/Cheap Indicators for
for Individual Stock Screened Individual Stock Screened
Note: Stocks that appear as unrated are either not covered by Lehman Brothers fundamental analysts or are currently subject to research restrictions.
Volatility Screen Summary Output
Number of Standard Deviations Above or Below
Spreads’ 2-Year Average
Current 1-Month If > 1 then “Rich”. If < -1 then “Cheap”
Implied Volatility
Rich/Cheap Metrics: Rich/Cheap Metrics:
Company Details 1-Month 3-Month
Implied Volatility Implied Volatility
January 31, 2006 6

7. Equity Derivatives Strategy | Equity Volatility Snapshot
Analyst Certification:
The respective research analysts responsible for the fundamental ratings hereby certify (1) that the views expressed in this research email accurately reflect our
personal views about any or all of the subject securities or issuers referred to in this email and (2) no part of our compensation was, is or will be directly or indirectly
related to the specific recommendations or views expressed in this email.
I, Ryan Renicker, hereby certify (1) that the views expressed in this research email accurately reflect my personal views about any or all of the subject securities or
issuers referred to in this email and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed
in this email.
To the extent that any of the conclusions are based on a quantitative model, Lehman Brothers hereby certifies (1) that the views expressed in this research email
accurately reflect the firm's quantitative research model (2) no part of the firm's compensation was, is or will be directly or indirectly related to the specific
recommendations or views expressed in this research report.
Important Disclosures
Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this email communication.
Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to
them, where such research is available. Customers can access this independent research at www.lehmanlive.com or can call 1-800-2-LEHMAN to request a copy of
this research.
Investors should consider this communication as only a single factor in making their investment decision.
The analysts responsible for preparing this report have received compensation based upon various factors including the Firm’s total revenues, a portion of which is
generated by investment banking activities.
Stock price and ratings history charts along with other important disclosures are available on our disclosure website at www.lehman.com/disclosures
And may also be obtained by sending a written request to: LEHMAN BROTHERS CONTROL ROOM , 745 SEVENTH AVENUE, 19TH FLOOR NEW YORK, NY
10019
Options are not suitable for all investors and the risks of option trading should be weighed against the potential rewards.
Supporting documents that form the basis of the recommendations are available on request. Please note that the trade ideas within
this report in no way relate to the fundamental ratings applied to European stocks by Lehman Brothers' Equity Research.
Guide to Lehman Brothers Equity Research Rating System
Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2- Equal weight or 3-Underweight (see definitions below) relative to other
companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (“the sector coverage universe”). To see a list of companies that
comprise a particular sector coverage universe, please go to www.lehman.com/disclosures.
In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below).
A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the
definitions of all ratings and not infer its contents from ratings alone.
Stock Rating
1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.
2-Equal weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.
3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.
RS-Rating Suspended - The rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances
including when Lehman Brothers is acting in an advisory capacity on a merger or strategic transaction involving the company.Sector View
1-Positive - sector coverage universe fundamentals are improving.
2-Neutral - sector coverage universe fundamentals are steady, neither improving nor deteriorating.
3-Negative - sector coverage universe fundamentals are deteriorating.
January 31, 2006 7

8. Equity Derivatives Strategy | Equity Volatility Snapshot
Distribution of Ratings:
Lehman Brothers Equity Research has 1841 companies under coverage.
42% have been assigned a 1-Overweight rating which, for purposes of mandatory disclosures, is classified as a Buy rating, 35% of companies with this rating are investment
banking clients of the Firm.
41% have been assigned a 2-Equal weight rating which, for purposes of mandatory disclosures, is classified as a Hold rating, 6% of companies with this rating are
investment banking clients of the Firm.
17% have been assigned a 3-Underweight rating which, for purposes of mandatory disclosures, is classified as a Sell rating, 72% of companies with this rating are
investment banking clients of the Firm.
This material has been prepared and/or issued by Lehman Brothers Inc., member SIPC, and/or one of its affiliates (“Lehman Brothers”) and has been approved by
Lehman Brothers International (Europe), authorized and regulated by the Financial Services Authority, in connection with its distribution in the European Economic
Area. This material is distributed in Japan by Lehman Brothers Japan Inc., and in Hong Kong by Lehman Brothers Asia Limited. This material is distributed in Australia
by Lehman Brothers Australia Pty Limited, and in Singapore by Lehman Brothers Inc., Singapore Branch. (“LBIS”). Where this material is distributed by LBIS, please
note that it is intended for general circulation only and the recommendations contained herein does not take into account the specific investment objectives, financial
situation or particular needs of any particular person. An investor should consult his Lehman Brothers’ representative regarding the suitability of the product and take
into account his specific investment objectives, financial situation or particular needs before he makes a commitment to purchase the investment product. This material
is distributed in Korea by Lehman Brothers International (Europe) Seoul Branch. This document is for information purposes only and it should not be regarded as an
offer to sell or as a solicitation of an offer to buy the securities or other instruments mentioned in it. No part of this document may be reproduced in any manner
without the written permission of Lehman Brothers. With the exception of disclosures relating to Lehman Brothers, this research report is based on current public
information that Lehman Brothers considers reliable, but we make no representation that it is accurate or complete, and it should not be relied on as such. In the case
of any disclosure to the effect that Lehman Brothers Inc. or its affiliates beneficially own 1% or more of any class of common equity securities of the subject company,
the computation of beneficial ownership of securities is based upon the methodology used to compute ownership under Section 13(d) of the United States' Securities
Exchange Act of 1934. In the case of any disclosure to the effect that Lehman Brothers Inc. and/or its affiliates hold a short position of at least 1% of the outstanding
share capital of a particular company, such disclosure relates solely to the ordinary share capital of the company. Accordingly, while such calculation represents
Lehman Brothers’ holdings net of any long position in the ordinary share capital of the company, such calculation excludes any rights or obligations that Lehman
Brothers may otherwise have, or which may accrue in the future, with respect to such ordinary share capital. Similarly such calculation does not include any shares
held or owned by Lehman Brothers where such shares are held under a wider agreement or arrangement (be it with a client or a counterparty) concerning the shares
of such company (e.g. prime broking and/or stock lending activity). Any such disclosure represents the position of Lehman Brothers as of the last business day of the
calendar month preceding the date of this report.
This material is provided with the understanding that Lehman Brothers is not acting in a fiduciary capacity. Opinions expressed herein reflect the opinion of Lehman
Brothers and are subject to change without notice. The products mentioned in this document may not be eligible for sale in some states or countries, and they may not
be suitable for all types of investors. If an investor has any doubts about product suitability, he should consult his Lehman Brothers representative. The value of and the
income produced by products may fluctuate, so that an investor may get back less than he invested. Value and income may be adversely affected by exchange rates,
interest rates, or other factors. Past performance is not necessarily indicative of future results. If a product is income producing, part of the capital invested may be
used to pay that income. © 2006 Lehman Brothers. All rights reserved. Additional information is available on request. Please contact a Lehman Brothers entity in your
home jurisdiction.
Lehman Brothers policy for managing conflicts of interest in connection with investment research is available at www.lehman.com/researchconflictspolicy. Ratings,
earnings per share forecasts and price targets contained in the Firm's equity research reports covering U.S. companies are available at
www.lehman.com/disclosures.
Complete disclosure information on companies covered by Lehman Brothers Equity Research is available at www.lehman.com/disclosures.
January 31, 2006 8