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Monday, December 21, 2009

Establish iShares MSCI Brazil Index Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of iShares MSCI Brazil Index (EWZ) covered calls as follows:

Established iShares MSCI Brazil Index (EWZ) Covered Calls for Jan2010:
12/21/09 Bought 200 EWZ @ $74.48
12/21/09 Sold 2 EWZ Jan2010 $76.00 Calls @ $1.67

Some possible overall performance results(including commissions) for the EWZ transactions would be as follows:
Stock Purchase Cost: $14,904.95
= ($74.48*200+$8.95 commission)

Net Profit:
(a) Options Income: +$323.55
= (200*$1.67 - $10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $74.48):
-$8.95 = ($74.48-$74.48)*200 - $8.95 commissions
(c) Capital Appreciation (If exercised at $76.00): +$295.05
= ($76.00-$74.48)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $74.48): +$314.60
= (+$323.55 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $76.00): +$618.60
= (+$323.55 +$0.00 +$295.05)

Absolute Return if Unchanged at $74.48: +2.1%
= +$314.60/$14,904.95
Annualized Return If Unchanged (ARIU) +29.6%
= (+$234.85/$14,904.95)*(365/26 days)

Absolute Return if Exercised at $76.00: +4.2%
= +$618.60/$14,904.95
Annualized Return If Exercised (ARIE) +58.3%
= (+$618.60/$14,904.95)*(365/26 days)