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Tuesday, February 19, 2008

Herbalife -- Continuation Transaction

The following transaction was made today to continue the covered calls written against the 500 shares of HLF:
02/19/08 Covered Calls Continuation Transaction -- STO 5 Mar08 40 Calls @ $3.20

The Transactions History to date is as follows:
12/26/07 Bought 500 HLF @ 39.32
12/26/07 Sold 5 HLF Jan08 40 Calls @ $1.40
01/19/08 Jan08 Options Expiration Date -- HLF closed below the strike price at $39.81
01/29/08 Covered Calls Continuation Transaction -- STO 5 Feb08 40 Calls @ $1.60
02/16/08 Feb08 Options Expiration Date -- KCI closed below the strike price at $39.46
02/19/08 Covered Calls Continuation Transaction -- STO 5 Mar08 40 Calls @ $3.20


The overall performance results(including commissions)for the HLF transactions through Mar08 expiration would be as follows:
Stock Purchase Cost: $19,669.95
($39.32*500+$9.95 commission)

Net Profit:
(a) Options Income: +$3,058.90 (500*$1.40 + 500*$1.60 + 500*$3.20 -3*$13.70)
(b) Dividend Income: $0
(c) Capital Appreciation (If exercised): +$320.10
= ($40.00-$39.32)*500 - 2*$9.95 commissions
Note that the stock price was slightly in-the-money today when the transaction was made.

Total Net Profit(If stock price exercised at $40): +$3,379.00
= ($3,058.90 + $0 + $320.10)


Annualized Return If Exercised (ARIE)= +114.0%
(+$3,379.00/$19,669.95)*(365/55)

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