Company: SVIX
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-044385
Chunk: 54

Company: VS Trust
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 54
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 price to the market price and the volatility of the underlying
reference instrument, the remaining term of the option, supply, demand or interest rates. An American style put or call option may be
exercised at any time during the option period while a European style put or call option may be exercised only upon expiration or during
a fixed period prior thereto. Put and call options are traded on national securities exchanges and in the OTC market. Options traded on
national securities exchanges are within the jurisdiction of the SEC or other appropriate national securities regulator, as are securities
traded on such exchanges. As a result, many of the protections provided to traders on organized exchanges will be available with respect
to such transactions. In particular, all option positions entered into on a national securities exchange in the United States are cleared
and guaranteed by the Options Clearing Corporation, thereby reducing the risk of counterparty default. Furthermore, a liquid secondary
market in options traded on a national securities exchange may be more readily available than in the OTC market, potentially permitting
a Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements.
There is no assurance, however, that higher than anticipated trading activity or other unforeseen events might not temporarily render
the capabilities of the Options Clearing Corporation inadequate, and thereby result in the exchange instituting special procedures which
may interfere with the timely execution of a Fund’s orders to close out open options positions.

-5-

Swap Agreements

Swaps are contracts that have traditionally been
entered into primarily by institutional investors in OTC markets for a specified period ranging from a day to many years. Certain types
of swaps may be cleared, and certain types are, in fact, required to be cleared. The types of swaps that may be cleared are generally
limited to only swaps where the most liquidity exists and a clearing organization is willing to clear the trade on standardized terms.
Swaps with customized terms or those for which significant market liquidity does not exist are generally not able to be cleared.

In a standard swap transaction, the parties agree
to exchange the returns on, among other things, a particular predetermined security, commodity, interest rate, or index for a fixed or
floating rate of return (the “interest rate leg,” which will also include the cost of borrowing for short swaps) in respect
of a predetermined notional amount. The notional amount of the swap reflects the extent of a Fund’s total investment exposure under
the swap