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Portfolio Activity

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Portfolio Activity

Stocks finished the final week of the May options expiration period with a solid advance, helping covered-call traders achieve another month of outstanding gains. The Dow Jones industrial average rose 1.89%, while the S&P 500 index gained 2.67% and the NASDAQ ended up 3.41%. Friday's closing prices showed the conservative CCS Portfolio with 45 potential winners among 49 published candidates during the past six weeks. The maximum possible gain of 6.20% came from the conservative position in China Technology Development Group (NASD:CTDC) and other notable opportunities were identified in Conceptus (NASD:CPTS) at 5.3%, Esmark (NASD:ESMK) at 4.1%, Ford Motor Company (NYSE:F) at 4.0%, and Melco PBL Entertainment (NASD:MPEL) at 4.0%. Of course, higher profits were available in some of the speculative portfolio plays and many of the longer-term positions provided favorable gains for investors with a more distant (bullish) outlook.

Although the market is firmly established in a near term upward trend, we believe it is poised for consolidation as rising oil prices and the uncertain housing market continue to weigh on equity values in many of the popular industry groups. With this fact in mind, we will adopt a more cautious stance in the conservative CCS Portfolio and focus primarily on low risk positions with minimally acceptable returns in the coming weeks.

The current status of the hypothetical portfolio (for educational narratives on position management) is as follows:

*****

LONG CSIQ Stock and SHORT MAY-22.50 Call
Cost Basis = $21.00
Maximum Profit = 7.2% (without margin)

CSIQ closed at $45.00 on 5/18/08, achieving maximum profit.

*****

LONG EGY Stock and SHORT MAY-5.00 Call
Cost Basis = $4.50
Maximum Profit = 11.1% (without margin)

EGY closed at $7.54 on 5/18/08, achieving maximum profit.

*****

LONG PGI Stock and SHORT MAY-$15.00 Call
Cost Basis = $13.50
Maximum Profit = 11.1% (without margin)

PGI closed at $14.00 on 5/18/08, achieving a profit of 3.7% if the stock was sold at the current price.

*****

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