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Tuesday, June 1, 2010

Continuation Transactions -- Apple Inc, Hewlett-Packard Co, iShares MSCI China ETF, and iShares MSCI Emerging Markets ETF Covered Calls

Friday, May 21st was options expiration for May2010. Today it was decided to retain the existing shares of Apple Inc(AAPL), Hewlett-Packard Co(HPQ), iShares MSCI China ETF(FXI), and iShares MSCI Emerging Markets ETF(EEM) and to establish Jun2010 covered calls positions. The transactions history as well as some possible results for each position are detailed below:

1. Apple Inc.(AAPL) -- Continuation Transaction
The transactions history to date for Apple Inc.(AAPL) is as follows:
02/24/2010 Bought 100 AAPL @ $198.677
02/24/2010 Sold 1 AAPL Mar2010 $210.00 Call @ $1.57
Roll-Up-and-Out Transaction:
03/19/2010 Buy-to-Close (BTC) 1 AAPL Mar2010 $210.00 @ $12.20
03/19/2010 Sell-to-Open (STO) 1 AAPL Apr2010 $230.00s @ $3.40
Note: The price of AAPL was $222.18 today when this debit-spread was transacted.
04/16/2010 Buy-to-Close (BTC) 1 AAPL Apr2010 $230.00 @ $19.00
04/16/2010 Sell-to-Open (STO) 1 AAPL May2010 $250.00 @ $9.40
Note: The price of AAPL was $248.90 today when this debit-spread was transacted.
5/22/2010 May2010 Options Expired
Note: The closing price of AAPL was $242.32 on expiration Friday
6/01/2010 Sold 1 AAPL Jun2010 $260.00 @ $9.50
Note: The price of AAPL was approximately $261.35 when this option was sold.

A possible overall performance result(including commissions) for the Apple Inc. (AAPL) transactions would be as follows:
Stock Purchase Cost: $19,876.65
= ($198.677*100+$8.95 commission)

Net Profit:
(a) Options Income: -$771.80
= (100*($1.57-$12.20+$3.40-$19.00+$9.40+$9.50) - 4*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock called away at $260.00): +$6,123.35
= ($260.00-$198.677)*100 - $8.95 commissions

Total Net Profit(If stock price exercised at $260.00): +$5,351.55
= (-$771.80 +$0.00 +$6,123.35)

Absolute Return (If Stock exercised at $260.00): +26.9%
= +$5,351.55/$19,876.65
Annualized Return If Exercised (ARIE) +85.5%
= (+$5,351.55/$19,876.65)*(365/115 days)


2. Hewlett-Packard Co.(HPQ) -- Continuation Transaction
The transactions history to date for the Hewlett-Packard Co.(HPQ) is as follows:
03/24/2010 Bought 200 HPQ @ $52.90
03/24/2010 Sold 2 HPQ May2010 $55.00 Calls @ $.85
05/22/2010 May2010 Options Expired
Note: The closing price of HPQ was $46.58 on expiration Friday
6/01/2010 Sold 2 HPQ Jun2010 $46.00s @ $1.20
Note: The price of HPQ was approximately $45.84 when these options were sold.

Some possible overall performance results(including commissions) for the HPQ transactions would be as follows:
Stock Purchase Cost: $10,588.95
= ($52.90*200+$8.95 commission)

Net Profit:
(a) Options Income: +$389.10
= (200*($.85+$1.20) - 2*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $45.84):
-$1,420.95 = ($45.84-$52.90)*200 - $8.95 commissions
(c) Capital Appreciation (If exercised at $46.00): -$1,388.95
= ($46.00-$52.90)*200 - $8.95 commissions

Total Net Profit(If stock price unchanged at $45.84): -$1,031.85
= (+$389.10 +$0.00 -$1,420.95)
Total Net Profit(If stock price exercised at $46.00): -$999.85
= (+$389.10 +$0.00-$1,388.95)

Absolute Return if Unchanged at $45.84: -9.7%
= -$1,031.85/$10,588.95
Annualized Return If Unchanged (ARIU) -40.9%
= (-$1,031.85/$10,588.95)*(365/87 days)

Absolute Return if Exercised at $46.00: -9.4%
= -$999.85/$10,588.95
Annualized Return If Exercised (ARIE) -39.6%
= (-$999.85/$10,588.95)*(365/87 days)


3. iShares MSCI China ETF(FXI) -- Continuation Transaction
The transactions history to date for iShares MSCI China ETF(FXI) is as follows:
11/18/09 Bought 600 FXI @ $45.54
11/18/09 Sold 6 FXI Dec09 $46.00 Calls @ $1.44
11/27/09 Bought 400 FXI @ $42.54
11/27/09 Sold 4 FXI Dec09 $44.00 Calls @ $1.13
12/19/09 Dec09 Options Expired
12/24/09 Sell-to-Open (STO) 10 FXI Jan2010 $43.00s @ $.63
Note: Price of FXI was $42.22 when the Jan2010 options were sold.
03/01/2010 Sell-to-Open (STO) 10 FXI Mar2010 $42.00s @.46
Note: Price of FXI was $40.54 when the Mar2010 options were sold.
03/20/2010 Mar2010 Options Expired
03/29/2010 Sell-to-Open (STO) 10 FXI Apr2010 $43.00s @ $.33
Note: Price of FXI was $41.49 when the Apr2010 options were sold.
04/15/2010 Buy-to-Close (BTC) 10 FXI Apr2010 $43.00s @ $.97
04/15/2010 Sell-to-Open (STO) 10 FXI May2010 $45.00s @ $.99
Note: Price of FXI was $43.92 when the May2010 options were sold.
05/22/2010 May2010 Options Expired
Note: The closing price of FXI was $38.21 on expiration Friday
6/01/2010 Sold 10 FXI Jun2010 $39.00s @ $1.34
Note: The price of FXI was approximately $39.02 when these options were sold.

A possible performance result(including commissions) for the FXI transactions would be as follows:
Stock Purchase Cost: $44,357.90
= ($45.54*600+$42.54*400+2*$8.95 commission)

Net Profit:
(a) Options Income: +$4,022.85
= (600*($1.44+$.63+$.46+$.33-$.97+$.99+$1.34)+400*($1.13+$.63+$.46+$.33-$.97+$.99+$1.34) - 7*$10.45 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If exercised at $39.00): -$5,348.95
= [($39.00-$45.54)*600-($39.00-$42.54)*400] - $8.95 commissions

Total Net Profit(If stock exercised at $39.00): -$1,326.10
= (+$4,022.85 +$0.00 -$5,348.95)

Absolute Return if Stock Exercised at $39.00: -3.0%
= -$1,326.10/$44,357.90
Annualized Return If Exercised (ARIE): -5.1%
= (-$1,326.10/$44,357.90)*(365/213 days)

4. iShares MSCI Emerging Markets(EEM) -- Continuation Transaction
The transactions history to date for iShares MSCI Emerging Markets(EEM) is as follows:
04/30/2010 Bought 400 EEM @ $42.55
04/30/2010 Sold 4 EEM May2010 $43.00 Calls @ $.85
05/22/2010 May2010 Options Expired
Note: The closing price of EEM was $37.34 on expiration Friday
6/01/2010 Sold 4 EEM Jun2010 $38.00s @ $1.35
Note: The price of EEM was approximately $37.82 when these options were sold.

Some possible overall performance results(including commissions) for the EEM transactions would be as follows:
Stock Purchase Cost: $17,028.95
= ($42.55*400+$8.95 commission)

Net Profit:
(a) Options Income: +$856.10
= (400*($.85+$1.35) - 2*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $37.82):
-$1,900.95 = ($37.82-$42.55)*400 - $8.95 commissions
(c) Capital Appreciation (If exercised at $38.00): -$1,828.95
= ($38.00-$42.55)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $37.82): -$1,044.85
= (+$856.10 +$0.00 -$1,900.95)
Total Net Profit(If stock price exercised at $38.00): -$972.85
= (+$856.10 +$0.00 -$1,828.95)

Absolute Return if Unchanged at $37.82: -6.1%
= -$1,044.85/$17,028.95
Annualized Return If Unchanged (ARIU) -44.8%
= (-$1,044.85/$17,028.95)*(365/50 days)

Absolute Return if Exercised at $38.00: -5.7%
= -$972.85/$17,028.95
Annualized Return If Exercised (ARIE) -41.7%
= (-$972.85/$17,028.95)*(365/50 days)

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