Option Investor

Monthly Report

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Despite the recent unpredictable market gyrations and the large number of post-earnings plunges, the OW portfolio performed remarkably well during the first full option-expiration period of 2005. Over the past 5 weeks, a total of eight positions were listed for conservative option writers. A potential gain of $1325, or 4.9% monthly (annualized), was the objective based on an initial margin requirement of $27,083. All of the recommended cash-secured puts expired at maximum profit, but two of the positions (GLBC and MYGN) were closed early to limit potential losses. In hindsight, these were not necessary trades. However, it is generally best to exit a questionable position prior to expiration (in the interest of prudent money management) and our cautious approach to this strategy has proven its value many times over the years. Overall, the potential portfolio profit was $900, against a margin requirement of $21,171, resulting in a 4.3% return on investment. That's not too bad when you consider the volatility of the quarterly earnings season and the mediocre performance of the broader equity markets.

January's OW Portfolio Summary

Stock Pick Last Exp Strik Opt Cost Initl Gain
Symbol Price Price Mon Price Bid Basis Margn (Loss)

CENX 25.49 28.16 FEB 22.50 0.25 22.25 $3728 $125
GLBC 20.52 17.30 FEB 15.00 0.30 14.70 $0 $0
RIO 29.03 31.99 FEB 25.00 0.25 24.75 $3916 $125
PMTI 24.81 27.11 FEB 20.00 0.45 19.55 $2782 $225
MYGN 25.88 21.26 FEB 22.50 0.45 22.05 $0 ($50)
BCSI 21.69 22.46 FEB 17.50 0.40 17.10 $2445 $200
MAY 32.80 33.45 FEB 27.50 0.30 27.20 $4060 $150
RDC 27.95 31.41 FEB 25.00 0.25 24.75 $4240 $125
Totals $21171 $900

Potential Profit = 4.3%

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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