THE TRADE  DATE :    February 1, 2006 

THE STOCK:  eResearchTechnology Inc. ERES provides technology and services that enable the pharmaceutical, biotechnology, and medical device industries to collect, interpret, and distribute cardiac safety and clinical data.

THE STRATEGY:  Establish a new Initial Position. 

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A prudent Covered Writer is required to "do the homework" prior to the purchase of any stock. Some interesting points would be as follows:

•     The stock has a BUY rating by many analysts.

•     ERES is an established company that currently provides medical information transfer to the industry.

•     The stock is up-trending after a prolonged flat period.

In this particular example, the call option below the current trading price of the stock was selected.  For the past twelve months the stock has traded in the $15 range.  Based on the good news in product development the stock has started an uptrend and the premium on calls has increased.  This has created an opportunity for the Covered Writer.  The initial outlay for the purchase of stock is reduced by almost 15% due to the call option premium.   If the value of the stock declines, the writer has the downside protection of having the strike price below the purchase price of the stock.  This action increases the premium paid when the call is sold.  In this case, it also allowed the Covered Writer to meet investment requirements in a shorter length of time (seven months).

In establishing this position, the Covered Writer will generate an acceptable realized gain if the option is exercised.  The risk is if the stock is not trading above the strike price in January 2007.  For that risk, the writer will keep the stock and the premium which is almost $285!  The Initial Position is 100 shares of stock with a $17.50 call option that expires in September of 2006.  This position seems as simple as bending over to pick money up that is laying in the street.  If the stock falls below the strike price, the covered writer will simply sell the appropriate call on the stock and continue to add cash to the portfolio.

Now to continue with the traditional Systematic Covered Writing example . . .

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THE COMMENTARY: For this example 100 shares of ERES were purchased and the Sep $17.50 call was sold.  By selling a seven month call, satisfactory cash was generated and the investment could return to cash in a relatively short time, or an additional call option could be sold this year if the Initial Call expires.  As can be seen, the position generated over 15% of the investment and if exercised, the annualized return would also be in excess of 15%.

Date	Strategy		Position	Investment	Generate	Total
1-Feb-06	Initial Stock Purchase		Buy 100 ERES @ 17.977	(1,822.72)
			eResearchTechnology Inc.
1-Feb-06	Initial Call Option		Sell Sep $17.50 call @ 3.10		$285.00
						$285.00
		The Initial Position      MATH EXERCISE
Stock Purchase Price			$17.98		Option Bid		$3.10
Number of Shares			100		Strike Price		$17.50
Trade Entry Code			2.00		Expiration Code		9.75
Cash Generated			$285.00		Net Stock Investment		$1,822.72
Net Return if Called			$187.28		Annualized if Called*		15.91%
	Minimum Cash Required for Position				$1,537.72
Percentage Recovered w/Option **				15.64%	(Cash Generation if not Called.)
	* The Annualized  if called is computed by dividing the net return by the net investment, which is the return for the duration of the position.
	To 'annualize' … the return for the duration is divided by the duration (in months) and then multiplied by 12.
	** The net cash generated divided by the net cash invested.  This is the 'downside protection'.
	This is not a profit percentage.  You could call it the Stock Ownership 'Risk Reduction' Percentage.

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PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN ERES STOCK OR ANY OTHER EQUITY.  THE INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY.  THERE IS NO GUARANTEE THAT SIMILAR TRANSACTIONS CAN BE EXECUTED IN THE FUTURE. INVESTING IN THE STOCK MARKET INVOLVES RISKS, DO SO ONLY WITH A KNOWLEDGE AND UNDERSTANDING OF THE RISKS INVOLVED!

The information provided above is for informational purposes only, and no mention of a particular security constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transaction, investment strategy is suitable for any specific person. You further understand that the Covered Writer will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information available on this website may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Always remember that past results are not necessarily indicative of future performance.

These are the terms of use.  Why are they here?  Because the examples provided are real.  The transactions actually took place.  The dates are real, the positions are real.  Some transactions will have been executed on the day you receive the email.  What you are agreeing to, is the fact that in no way is it being suggested that you can, or should, enter a similar position.  Why?  Because that would be providing investment advice and the Covered Writer is not authorized to do that.  There is also no guarantee that similar transactions could be executed at any time in the future. Only licensed brokers are allowed to provide investment advice.  Therefore, you are agreeing that the preceding example was provided for 'educational purposes' for the sole purpose of illustrating the Systematic Covered Writing strategies.

Thank you!

SYSTEMATIC COVERED WRITING
Copyright © 2006. All rights reserved.
Revised: 02/05/07