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Capital Trading Group
CTA Profile - 21st Financial, Inc.
Program - Index Option Program
Principal(s): William Mannon & Michael Garton
Trading Strategy: Index Option Spreads

Trading Description:
21st Financial, Inc. has developed an Index Option Program (“IOP”) which involves participating in options on futures of major financial markets. The proprietary strategy involves selling Call and/or Put options on a market and simultaneously hedging that position by buying the same number of Call and/or Put options at strike prices further from the current market. A positive cash flow is created by the sale premium being greater than the cost of the hedge (the buy premium.) This cash flow becomes income (or return on investment) if the options expire worthless (out of the money) or are liquidated for a net gain prior to expiration. A loss is incurred if the sale option ends in the money or if a position is liquidated for a net loss prior to expiration. 21st Financial's trading strategy can but does not necessarily combine both Call and Put transactions. By hedging (buying) Call and Put options a position’s loss should not exceed the established points between the sold and bought option strike prices thus providing for a defined maximum loss. Generally, the maximum loss for an account participating in the IOP is limited to the equity in the account (assuming the account is not notionally funded) but there can be no guarantee against a loss or guarantee as to the size of a loss. In general, the IOP should be profitable when an index price remains relatively constant and can be unprofitable when an index makes significant moves either up or down during the option period.

21st Financial relies upon both fundamental and technical analysis in making trading decisions and identifying price trends in a security or commodity interest. Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies, particularly as they relate to a particular investment vehicle in order to predict future prices of that investment vehicle. This method of security analysis is considered to be the opposite of technical analysis which focuses attention on the study of the financial markets themselves. Technical analysis of the markets includes a study of the actual daily, weekly and monthly price fluctuations as well as volume variations and changes in open interest, utilizing charts and computers for analysis of these items and other technical market data. While the principals of 21st Financial believe that in the case of certain option markets, technical analysis can be extremely helpful in anticipating and/or predicting the probability of market movement it cannot be the sole input for investment decisions. 21st Financial utilizes a combination of fundamental and technical analysis techniques to determine the timing and pricing of its option positions.

Risk Strategy:
 The key components to 21st Financial’s risk management process are grounded in monitoring the markets and our positions each day and adjusting them as indicated by market changes. We rely on the following trading disciplines to assist in our risk management efforts: Spread Selection – We generally enter the market with out-of-the money spread positions requiring substantial movements in the equity index (either up or down) before triggering exit consideration. Trade Time Horizon – Generally, our positions are of short duration; less than 30 days to expiration. Hedge Protection - Any sold option is simultaneously covered (further out of the money) with a bought option of equal value and the same expiration date thereby capping the potential investment loss to the spread between the sold and bought option strike prices. Multiple Positions - We generally diversify our investors’ funds by establishing several different positions each month, thereby spreading risk amongst various strike prices and/or expiration dates. Proprietary Analysis – We constantly monitor positions and perform rigorous analysis to determine if adjustment of a position as it moves towards expiration is required. Market Liquidity – We use very liquid stock indices (currently the S & P Futures Index) to maximize our ability to exit trades quickly when conditions warrant.
Trading Approach
Systematic - 0.00%
 Discretionary - 100.00%
Trading Methodology
Short Term
Markets Traded

Non Diversified
Stock Indicies
Sector
US Markets
Contracts Traded
Options

Annual Performance Since 2003
2003
0.00%
2004
0.00%
2005
0.00%
2006
0.00%
2007
0.00%
2008
-5.83%
2009
20.97%
Recent Performance
Currency Denomination - US Dollars 
2010 Monthly Return YTD Return Assets Under Mgt
08/31/10 2.08% -2.68% 120,735
07/31/10 5.44% -4.66% 118,401
06/30/10 -1.26% -9.58% 114,242
05/31/10 -9.17% -8.42% 114,242
04/30/10 1.02% 0.82% 125,350
03/31/10 0.83% -0.20% 125,379
02/28/10 3.16% -1.02% 121,043
01/31/10 -4.05% -4.05% 126,435
2009 Monthly Return YTD Return Assets Under Mgt
12/31/09 1.97% 20.97% 122,656
11/30/09 2.71% 18.63% 83,331
10/31/09 1.57% 15.50% 21,308
09/30/09 1.44% 13.71% 21,007



VAMI Chart (Based on a $1,000 Initial Value)
 Monthly Percentage Returns Chart

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
Investment Details
 Disclosure Document Date
04/01/10  
 Starting Date of Program
05/01/08 
 Accepting New Money?
Yes  
 Average  Annual Rate of Return
5.34% 
 Peak to Valley Drawdown
-18.08 % 
Average  Margin as % of Equity
100.00% 
 Round Turns per Million
9,600 
 Minimum Sized Account
25,000 
 Currency Denomination
US Dollars 
 Management Fee
2.00% 
 Incentive Fee
20.00% 
 Notional Funding?
No  
 Member of NFA
Yes  
 Other Memberships
None 


Statistical Definitions
(1) From January 1990 or Starting Date of Program - The Annual Average Rate of Return represents the compounded rate of return for each year or portion thereof presented. It is computed by applying successively respective monthly rate of return for each month beginning with the first month of that period. This includes all monthly data from the inception of the program or from January 1990, whichever is less.
(2) From January 1990 or Starting Date of Program - The Worst Peak-to-Valley Drawdown is defined as the greatest cumulative percentage decline in net asset value due to losses sustained by the trading program during any period in which the initial net asset value is not equaled or exceeded by a subsequent asset value. "Monthly" indicates that the Worst-Peak-to-Valley Drawdown" is based on monthly Data.

 
 

Risk Disclosure
THE RISK OF TRADING COMMODITY FUTURES, OPTIONS AND FOREIGN EXCHANGE ("FOREX") IS SUBSTANTIAL. THE HIGH DEGREE OF LEVERAGE ASSOCIATED WITH COMMODITY FUTURES, OPTIONS AND FOREX CAN WORK AGAINST YOU AS WELL AS FOR YOU. THIS HIGH DEGREE OF LEVERAGE CAN RESULT IN SUBSTANTIAL LOSSES, AS WELL AS GAINS. YOU SHOULD CAREFULLY CONSIDER WHETHER COMMODITY FUTURES, OPTIONS AND FOREX IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IF YOU ARE UNSURE YOU SHOULD SEEK PROFESSIONAL ADVICE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE SUCCESS. IN SOME CASES MANAGED ACCOUNTS ARE CHARGED SUBSTANTIAL COMMISSIONS AND ADVISORY FEES. THOSE ACCOUNTS SUBJECT TO THESE CHARGES, MAY NEED TO MAKE SUBSTANTIAL TRADING PROFITS JUST TO AVOID DEPLETION OF THEIR ASSETS. EACH COMMODITY TRADING ADVISOR ("CTA") IS REQUIRED BY THE COMMODITY FUTURES TRADING COMMISSION ("CFTC") TO ISSUE TO PROSPECTIVE CLIENTS A RISK DISCLOSURE DOCUMENT OUTLINING THESE FEES, CONFLICTS OF INTEREST AND OTHER ASSOCIATED RISKS. A HARD COPY OF THESE RISK DISCLOSURE DOCUMENTS ARE READILY AVAILABLE BY CLICKING ON EACH CTA'S "REQUEST DISCLOSURE DOCUMENT" BUTTON. THE FULL RISK OF COMMODITY FUTURES, OPTIONS AND FOREX TRADING CAN NOT BE ADDRESSED IN THIS RISK DISCLOSURE STATEMENT. NO CONSIDERATION TO INVEST SHOULD BE MADE WITHOUT THOROUGHLY READING THE DISCLOSURE DOCUMENT OF EACH OF THE CTAS IN WHICH YOU MAY HAVE AN INTEREST. REQUESTING A DISCLOSURE DOCUMENT PLACES YOU UNDER NO OBLIGATION AND EACH DOCUMENT IS PROVIDED AT NO COST. THE CFTC HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN ANY OF THE FOLLOWING PROGRAMS NOR ON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE DOCUMENTS. OTHER DISCLOSURE STATEMENTS ARE REQUIRED TO BE PROVIDED TO YOU BEFORE AN ACCOUNT MAY BE OPENED FOR YOU.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. PROSPECTIVE CLIENTS SHOULD NOT BASE THEIR DECISION ON INVESTING IN THIS TRADING PROGRAM SOLELY ON THE PAST PERFORMANCE PRESENTED. ADDITIONALLY, IN MAKING AN INVESTMENT DECISION, PROSPECTIVE CLIENTS MUST ALSO RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY MAKING THE TRADING DECISIONS AND THE TERMS OF THE ADVISORY AGREEMENT INCLUDING THE MERITS AND RISKS INVOLVED.

THE ABOVE PERFORMANCE NUMBERS HAVE BEEN SUPPLIED BY THE CTAS. CAPTIAL TRADING GROUP LP NO WAY GUARANTEES THE ACCURACY OF THESE NUMBERS AND HAS SUPPLIED THEM TO YOU FOR INFORMATIONAL PURPOSES ONLY. THIS DOES NOT CONSTITUTE A SOLICITATION TO BUY OR AN OFFER TO SELL. NO INVESTMENT SHOULD BE MADE WITHOUT FULLY REVIEWING THE ASSOCIATED RISK FACTORS, FEES AND CONFLICTS OF INTEREST AS OUTLINED IN EACH CTA'S RISK DISCLOSURE DOCUMENT. THERE MAY BE CTAS WHO HAVE CHOSEN NOT TO PARTICIPATE THAT MAY HAVE BETTER OR WORSE PERFORMANCE THAN THOSE CTAS IN OUR DATABASE.

PLEASE NOTE THAT THERE IS AN INHERENT RISK OF LOSS ASSOCIATED WITH TRADING FUTURES AND OPTIONS CONTRACTS. PLEASE CAREFULLY CONSIDER YOUR FINANCIAL CONDITION BEFORE INVESTING IN FUTURES AND OPTIONS CONTRACTS. FUTURES TRADING IS NOT SUITABLE FOR ALL INVESTORS