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Monthly Report

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The first two months of 2005 have been a very active period for the stock market with the SP-500 index dropping nearly 5% before rebounding to multi-year highs early last week. Issues in a variety of sectors were affected by the volatile price trends and a number of popular companies saw their shares hammered by investors after unfavorable earnings reports.

Despite the extreme uncertainty surrounding equity values, the MCM portfolio provided conservative option traders with modest gains in a diverse assortment of bullish and bearish positions. During the six weeks prior to the February options expiration, the MCM newsletter recommended 15 low-risk credit spreads, 12 of which expired at maximum profit. Obviously, the earnings-driven environment was less than favorable for "premium selling" strategies and we endured our share of unexpected moves in the portfolio. At the same time, a rigid adherence to prudent position management helped limit potential draw-downs in the losing plays.

Overall, the model portfolio finished the expiration period with a potential profit of $2375 against a maximum margin requirement of $32,400. However, the "early-exit" trades in 4 of the positions reduced the necessary collateral amount to $22,425, thus increasing the prospective yield and allowing us to initiate some new plays for March.

Looking forward, our only concern is the bullish spread in Take-Two Interactive Software (NASDAQ:TTWO) which may soon see an early exit (or adjustment) if the stock fails find buying interest when it tests a recent support level near $36 in the coming week.

MCM Staff


JANUARY'S MCM PORTFOLIO SUMMARY


BULLISH SPREADS

Stock Pick Last Exp Long Sold Spread Cost Margn Gain
Symbol Price Price Mon Put Put Credit Basis Maint (Loss)


PIXR 86.36 90.17 FEB 75.0 80.0 0.70 79.30 $2150 $350
CECO 42.05 35.91 FEB 30.0 35.0 0.65 34.35 $0 ($125)
LPNT 37.63 39.71 FEB 30.0 35.0 0.50 34.50 $2250 $250
CTX 60.85 61.76 FEB 50.0 55.0 0.50 54.50 $2250 $250
UPL 50.61 55.45 FEB 40.0 45.0 0.55 44.45 $2225 $275
OIH 86.85 96.30 FEB 75.0 80.0 0.40 79.60 $2300 $200
SYNA 36.81 22.01 FEB 25.0 30.0 0.45 29.55 $0 $100
VRNT 38.01 39.08 FEB 30.0 35.0 0.30 34.70 $2350 $150
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Totals $13525 $1450

BEARISH SPREADS


Stock Pick Last Exp Long Sold Spread Cost Margn Gain
Symbol Price Price Mon Call Call Credit Basis Maint (Loss)

MERQ 41.25 45.84 FEB 47.5 45.0 0.50 45.50 $0 ($50)
IMCL 42.70 42.52 FEB 55.0 50.0 0.45 50.45 $2275 $225
SLAB 30.47 34.76 FEB 40.0 35.0 0.45 35.45 $0 ($75)
ONXX 30.31 28.14 FEB 40.0 35.0 0.65 35.65 $2175 $325
CCMP 36.51 32.63 FEB 45.0 40.0 0.70 40.70 $2150 $350
MMM 82.02 85.55 FEB 90.0 85.0 0.50 85.50 $0 ($50)
APOL 77.61 75.53 FEB 90.0 85.0 0.40 85.40 $2300 $200
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Totals $8900 $925

Overall Profit =10.59%


The portfolio summary is a reasonable account of the positions previously offered in this section. However, no representation is being made as to the actual performance of a position and in fact, there may be large differences between the summary results and those of our subscribers, due to the variety of ways in which each play can be opened, closed, and/or adjusted. In addition, the summary might not be completely representative of the manner in which the average trader would react to changing conditions in a position and to the options market in general. The editors of this section do not take actual positions in any published plays and the summary comments are simply a service to help new traders understand when positions might be opened and closed. In most cases, actions taken based on the commentary would be far too late to be effective, thus it is not intended as a substitute for personal trade management nor does it in any way replace your duty to diligently monitor and manage the positions in your portfolio.

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