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Saturday, February 28, 2009

Returns -- Through February 2009

The Covered Calls Advisor Portfolio (CCAP) has substantially outperformed the Russell 3000 benchmark so far in 2009. Selling call options against our stock holdings provides us covered calls investors with a clear relative advantage over the typical buy-and-hold investor; this is especially true during bearish markets (such as we are currently experiencing) as well as during range-bound markets.

Below is the Covered Calls Advisor Portfolio results for January and February 2009 year-to-date. First, a single performance measure is used to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. A simple example demonstrates how it is calculated:
If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.

1. February 2009 Year-to-Date Results:

CCAP Absolute Return (Jan 1st through Feb 28th, 2009) = -7.35%

Benchmark Russell 3000(IWV) Absolute Return(Jan 1st through Feb 28th,2009) = -17.98%

Although negative, the CCAP has performed substantially better than the Russell 3000 benchmark thus far in 2009.

2. Prior Years Results:

The Covered Calls Advisor Portfolio (CCAP) was begun in September, 2007. The annualized returns achieved for 2007 and 2008 compared with the Russell 3000 benchmark results were as follows:

For establishing new covered calls positions at this time, the Covered Calls Advisor's Overall Market Meter (shown in the right sidebar near the top of this page) shows that a SLIGHTLY BULLISH investment posture is recommended.
The corresponding covered calls investing approach is to write near-month primarily slightly out-of-the-money covered calls. By 'slightly out-of-the-money', this advisor means that for a covered calls portfolio, on average covered calls positions should be established somewhere between 1.0% and 2.5% below the strike price.

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