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Tuesday, February 24, 2009

Establish Inc Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Inc (SOHU) covered calls.

Sohu is an internet services provider to consumers and businesses in China. Their services include brand advertising, sponsored search, online games, and wireless services. It ranks very high on the Covered Calls Advisor 'Buy Alerts' worksheet with positive ratings in 8 of the 9 metrics. Most compelling is the relatively modest current P/E ratio of 11.7 for a company with 20%+ expected annual growth rate. In addition, the balance sheet is very strong with high cash levels and no debt.

A summary of the transactions is as follows:

Established Inc Covered Calls for Mar09:
02/24/09 Bought 400 SOHU @ $44.617
02/24/09 Sold 4 SOHU Mar09 $45.00 Calls @ $3.20

Absolute Return if Unchanged: +7.2%
Annualized Return If Unchanged (ARIU): +104.6%
Absolute Return if Exercised: +8.0%
Annualized Return If Exercised (ARIE): +117.2%
Downside Breakeven Price Point: $41.417
Downside Breakeven Protection: 7.2%

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