RHT Initial Position

Systematic Covered Writing

More than just covered calls . . .

Initial Position - The Math Exercise

This SysCW Initial Position was emailed to subscribers on the day the transactions were executed. In order to know what to do in the future, it is important to understand what we did in the past.

The Email Comments:
New position established today. The downside is a little light, but if called . . . who cares?
The Covered Writer
Additional Comments: Some writer's may choose to be more aggressive. The downside is a little on the light side as mentioned in the email message, but the stock only needs to appreciate by thirty cents in order for the call to be exercised. For Initial Positions that do not meet expectations, a blend of aggressive and conservative positions is probably the better way to go,


	Systematic Covered Writing
	… more than just covered calls!


	Initial Position: The Math Exercise
	Position:	100 RHT With Sep 2007 $22.50 LEAP

	Red Hat, Inc.			RHT Sep 2007 22.5000 call

	Stock Symbol		RHT		Call Symbol			.RHTIX

	Stock Purchase Price		$22.278		Call Sold Price			$3.10

	Number of Shares		100		Call Strike Price			22.500

	Trade Entry Date		22-Jan-07		Expiration M & Y			9	2007

	Net Cash Generated		$301.75		Net Stock Investment			$2,234.75

	Net Return if Called		$300.00		Annualized if Called (1)			20.25%		(A)

	Cash Required for Trade				$1,933.00

	Percentage Recovered w/Option *				13.50%	(B)

Days Until Expiration & Expire Date					242		21-Sep-07

PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN RHT 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