Our Covered calls strategy

As we help our clients pursue their individual investment goals, we may incorporate the technique of covered call writing. This represents a specific way of using options to manage risk and hedge individual positions or entire portfolios. Covered calls are often used when an investor wants to generate additional income beyond dividends from the underlying stock, and/or gain a limited amount of protection against a decline in the stock's value. Generating income from covered calls does not provide protection from significant downward price movement. Downside protection is limited to the amount of premium received from the sale of the covered calls.

Covered call writing involves the simultaneous purchase of stock and the sale of a call option -; also referred to as a "buy-write" strategy - or the sale of a call option covered by underlying shares currently held by investors in their brokerage accounts.

Covered calls generate income because the writer receives a cash premium for writing the call. However, the writer will be obligated to sell the stock at the call's strike price if assigned; as a result, the writer gives up the chance to benefit from any appreciation above the strike price, and the sale of shares due to assignment may result in a taxable gain.

Because covered call writing decreases the risk of stock ownership, it is compatible with our conservative, results-oriented investment philosophy. We have extensive experience incorporating this technique in managing our clients' investments. If you would like to learn more about covered call writing and whether it may be an appropriate strategy for your portfolio, please contact us.

Options trading involves risk and is not suitable for all investors. Options should comprise only a modest portion of a portfolio. Prior to making any options transactions, investors must receive a copy of an Options Disclosure Document titled "Characteristics and Risks of Standardized Options". This document can be obtained from our office or at the following url: http://theocc.com/publications/risks/riskchap1.jsp

For more information about options and covered calls, please refer to the following articles:

• Facts and Myths About Options
• Equity Options Strategies: Covered Calls
• The CBOE S&P 500 BuyWrite Index

Supporting documentation for any claims (including any claims made on behalf of our options programs or our options expertise), comparison, recommendations, statistics or other technical data, will be supplied upon request.Investors should consult with a tax advisor to determine how taxes may affect the outcome of the above strategy.