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Thursday, December 3, 2009

Continuation Transaction -- Fuqi International Inc.

The Covered Calls Advisor Portfolio(CCAP) position in Fuqi International Inc.(FUQI) was out-of-the-money at Nov09 expiration. Today it was decided to retain the 200 shares of Fuqi International Inc.(FUQI) and to establish a Dec09 covered calls position as follows:

12/03/09 Sell-to-Open (STO) 2 FUQI Dec09 $22.50s @ $.35

The transactions history to date and the profit potential for the continuation covered calls position in FUQI is as follows:
10/16/09 Bought 200 FUQI @ $25.45
10/16/09 Sold 2 FUQI Nov09 $26.00 Calls @ $2.00
11/21/09 Nov09 Options Expired
12/03/09 Sell-to-Open (STO) 2 FUQI Dec09 $22.50s @ $.35
Note: The price of FUQI was $20.84 today when this transaction was made.

Some possible overall performance results(including commissions) for the FUQI transactions would be as follows:
Stock Purchase Cost: $5,098.95
= ($25.45*200+$8.95 commission)

Net Profit:
(a) Options Income: +$449.10
= (200*($2.00+$.35) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $20.84):
-$930.95 = ($20.84-$25.45)*200 - $8.95 commissions
(c) Capital Appreciation (If exercised at $22.50): -$598.95
= ($22.50-$25.45)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $20.84): -$481.85
= (+$449.10 +$0.00 -$930.95)
Total Net Profit(If stock exercised at $22.50): -$149.85
= (+$449.10 +$0.00 -$598.95)

Absolute Return if Stock Price Unchanged at $20.84: -9.4%
= -$481.85/$5,098.95
Annualized Return If Unchanged (ARIU): -53.9%
= (-$481.85/$5,098.95)*(365/64 days)

Absolute Return if Stock Exercised at $22.50: -2.9%
= -$149.85/$5,098.95
Annualized Return If Exercised (ARIE): -16.8%
= (-$149.85/$5,098.95)*(365/64 days)

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