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Tuesday, January 22, 2008

RenaissanceRe Holdings Ltd. and Lockheed Martin Corp -- Continuation Transactions

1. RenaissanceRe Holding Ltd.(RNR) Continuation Transaction

Despite the quarterly earnings release scheduled for 2/5/08 which is prior to the Feb08 options expiration date, it was decided to continue writing covered calls against the RNR holding since it is a highly recommended 'buy' by both stock advisory companies used by this advisor. In addition, the call option was priced very attractively for selling since its implied volatility was 39% greater than that of the 90-day historic volatility of the underlying RNR stock.

The following transaction was made today to continue the covered calls written against the 400 shares of RNR:
01/22/08 Covered Calls Continuation Transaction -- STO 4 Feb08 55 Calls @ $2.75
Note: RNR closed today at $55.33.

The Transactions History to date is as follows:
12/27/07 Initial Stock Position -- Bought 400 RNR @ 60.64
12/27/07 Initial Call Options -- Sold 4 RNR Jan08 60 Calls @ $2.60
01/19/08 Jan08 Options Expiration Date – RNR stock closed below the strike price
01/22/08 Covered Calls Continuation Transaction -- STO 4 Feb08 55 Calls @ $2.75

The overall performance results(including commissions)for the RNR transactions through the Feb08 expiration would be as follows:
Stock Purchase Cost: $24,265.95
($60.64*400+$9.95 commission)

Net Profit:
(a) Options Income: $2,114.10 (400*$2.60 + 400*$2.75 - 2*$12.95 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation (If exercised): -$2,265.95 ($55.00-$60.64)*400 - $9.95
Total Net Profit(If stock price exercised at $55.00): -$151.85 ($2,114.10-$2,265.95)

Annualized Return If Exercised (ARIE) -4.5% (-$151.85/$24,265.95)*(365/51)



2. Lockheed Martin Corp (LMT) Continuation Transaction

The following transaction was made today to continue the covered calls written against the 200 shares of LMT:
01/22/08 Covered Calls Continuation Transaction -- STO 2 Feb08 105 Calls @ $2.20

A summary of the LMT transactions to date, including today's roll up is as follows:
1/10/08 Initial Stock Position -- BTO 200 LMT @ $109.62
1/10/08 Initial Call Options -- STO 2 LMT Jan08 110 Calls @ $1.70
01/19/08 Jan08 Options Expiration Date – LMT stock closed below the strike price
01/22/08 Covered Calls Continuation Transaction -- STO 2 Feb08 105 Calls @$2.20

The overall performance results(including commissions)for the LMT transactions through Feb08 expiration would be as follows:
Stock Purchase Cost: $21,933.95
($109.62*200+$9.95 commission)

Net Profit:
(a) Options Income: $757.10 (200*$1.70 + 200*$2.20 - 2*$11.45 commissions)
(b) Dividend Income: $0
(c) Capital Appreciation (If stock price unchanged from todays closing price of $101.02): -$1,729.95 ($101.02-$109.62)*200 - $9.95 commissions
(c) Capital Appreciation (If exercised): -$933.95 ($105-$109.62)*200 - $9.95

Total Net Profit(If stock price unchanged at $101.02): -$972.85 (-$1,729.95+$757.10)
Total Net Profit(If stock price exercised at $105): -$176.85 (-$933.95+$757.10)

Annualized Return If Unchanged (ARIU) -43.8% (-$972.85/$21,933.95)*(365/37)
Annualized Return If Exercised (ARIE) -8.0% (-176.85/$21,933.95)*(365/37)

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