Capital Trading Group

Trading Description:
The trading strategy utilized by the Advisor is proprietary and confidential. The following description is of general necessity and is not intended to be all-inclusive.
>br> The Advisor currently engages in a program of selling or “writing” out-of-the-money options (puts and calls) on stock index futures at the Chicago Mercantile Exchange.
>br> The Stock Index Options Program utilizes a strategy that relies heavily on selling or “writing” options on stock index futures with the expectation that they will expire without the need to buy them back. However, in order to control risk, based on a proprietary risk control system, the advisor will roll out either vertically or diagonally (to a further month and further out-of-the-money options) to buy space or space and time. DCM may also roll the options written closer to the underlying futures price if it perceives the risk/reward is in its favor to do so. Occasionally, options may be purchased either to hedge other positions or speculate on substantial movement in the underlying stock index.

The implementation of this trade program depends on technical analysis, chart reading and pattern recognition to determine which options to write on each monthly cycle. Technical analysis involves the study of charted prices, volumes, momentum, strengths, and moving averages to determine the future course of prices. Technical indicators also include the prices of various options, both in absolute terms in relation to their historic price level, and in relative terms comparing the prices of puts to the prices of similar calls.
>br> The trading program involves primarily a non-directional strategy utilizing an average of four to five week trade durations within given price range levels. The profitability of a trading program consisting of selling (“writing”) options on an index depends upon the subsequent price movement of the index. For example when the Advisor writes puts on an index, and the puts are not bought in before their expiration, the strategy will be profitable if the index is above the strike price of the put when the put expires. If the index is below the strike price of the put when the put expires, the strategy may potentially produce a loss.
>br> Conversely, when the Advisor writes calls on an index, and the calls are not bought in before their expiration, the strategy will be profitable if the index is below the strike price of the call when the call expires. If the index is above the strike price of the call when the call expires, the strategy may potentially produce an unlimited loss.

Conversely, when the Advisor writes calls on an index, and the calls are not bought in before their expiration, the strategy will be profitable if the index is below the strike price of the call when the call expires. If the index is above the strike price of the call when the call expires, the strategy may potentially produce an unlimited loss.
>br> It is the intention of the Advisor to write mainly “out-of-the-money” puts and calls. “Out-of-the-money” puts have strike prices below the current price of the index, and “out-of-the-money” calls have strike prices above the current index price. Thus, if the index remains within the pre-determined trading range, based on current volatility, time to expiration, and various other market conditions, and the option remains “out-of-the-money” until expiration, the puts and calls will be profitable.
>br> The trading strategies utilized within this program have pre-defined profit goals and risk exposure. Stop loss measures are utilized as well as the use of derivative hedging techniques to quantify market exposure. Market conditions are monitored for liquidity, range of movement and implied volatility measured against historical volatility. In doing so, the Advisor employs money management skills acquired over years of experience. It is important to note that the option program had a major overhaul as the end of 2008, after which it became more systematic and with much more rigorous risk controls applied.
>br> Please note that given the volatile nature of the markets and possible changes in economic or government policies, amongst other factors, that can not be controlled or foreseen by the Advisor, no assurances can be offered that the Advisor's trading actions and stop loss measures will successfully contain losses and result in profitable trades for a Client, or that a Client will not incur substantial losses.
>br> The Advisor may refine or change trading methods and strategies (including technical trading factors or analyses) at any time without prior notice to or approval by participating customers. DCM in its sole discretion may elect to not trade at certain times or may elect at times to trade in smaller quantities. The exercise of this discretion by DCM may result in missing significant profit opportunities or avoiding risks that may otherwise be realized.

Trading Approach

Systematic - 30.00%
Discretionary - 70.00%
Trading Methodology
Non Trend Following: Fundamental Discretionary Option Writer
Markets Traded
Non Diversified Stock Indicies
Sector
US Markets
Contracts Traded
Futures Options

Annual Performance Since 2003

2003	0.00%
2004	0.00%
2005	0.00%
2006	9.75%
2007	18.05%
2008	-11.80%
2009	16.10%

Recent Performance

Currency Denomination - US Dollars

2010	Monthly Return	YTD Return	Assets Under Mgt
07/31/10	5.48%	5.47%	2,338,553
06/30/10	-0.66%	-0.01%	3,014,737
05/31/10	-3.26%	0.65%	3,030,442
04/30/10	0.04%	4.04%	3,134,035
03/31/10	1.28%	4.00%	1,000
02/28/10	1.58%	2.69%	1,000
01/31/10	1.09%	1.09%	1,000
2009	Monthly Return	YTD Return	Assets Under Mgt
12/31/09	1.15%	16.10%	1,000
11/30/09	0.39%	14.79%	1,000
10/31/09	0.83%	14.34%	1,000
09/30/09	1.80%	13.40%	1,000
08/31/09	2.55%	11.39%	1,000