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Wednesday, February 4, 2009

Roll Up -- Potash Corp of Saskatchewan Inc.

The Covered Calls Advisor Portfolio (CCAP) covered calls position in Potash Corp of Saskatchewan Inc(POT) was rolled-up today (02/04/09) from the Feb09 $70s to the Feb09 $80s.

The spread transaction was executed as follows:
02/04/09 Buy-to-Close (BTC) 10 POT Feb09 $70s @ $10.60
02/04/09 Sell-to-Open (STO) 10 POT Feb09 $80s @ $3.60
Net Debit on Roll Up $7.00 ($10.60-$3.60)

The ‘net debit to strike price difference ratio’ was 70% [($10.60-$3.60)/($80-$70)]*100, which achieved the Covered Calls Advisor's desired threshold criteria which is to roll up only when this ratio is <76%.

The Transactions History to date is as follows:
12/22/08 Initial Stock Purchase Transaction -- Bought 200 POT @ $65.84
12/22/08 Inital Calls Sold Transaction -- Sold 2 POT Jan09 $65.00 Calls @ $5.90
Roll-Up Spread Transaction:
01/02/09 Buy-to-Close (BTC) 2 POT Jan09 $65s @ $11.35
01/02/09 Sell-to-Open (STO) 2 POT Jan09 $75s @ $4.35
01/15/09 $20.00 Ex-Dividend ($.10*200 shares)
01/17/09 Jan09 Options Expired
01/22/09 Continuation Transaction -- Sell-to-Open (STO) 2 POT Feb09 $70s @ $7.20
Note: The price of POT was $72.36 today when the calls were sold.
Roll-Up Spread Transaction:
02/04/09 Buy-to-Close (BTC) 10 POT Feb09 $70s @ $10.60
02/04/09 Sell-to-Open (STO) 10 POT Feb09 $80s @ $3.60
Net Debit on Roll Up $7.00 ($10.60-$3.60)
Note: The price of POT was $79.42 today when the spread was transacted.

The overall performance results(including commissions) for the POT transactions through the Feb09 expiration would be as follows:

Stock Purchase Cost: $13,176.95
($65.84*200+$8.95 commission)

Net Profit:
(a) Options Income: -$221.80
(200*($5.90-$11.35+$4.35+$7.20-$10.60+$3.60) - 4*$10.45 commissions)
(b) Dividend Income: +$20.00
(c) Capital Appreciation (If exercised): +$2,823.05
= ($80.00-$65.84)*200 - $8.95 commissions

Total Net Profit(If stock price exercised at $80.00): +$2,621.25
= (-$221.80 +$20.00 +$2,823.05)

Absolute Return If Exercised = +19.9%
+$2,621.25/$13,176.95
Annualized Return If Exercised (ARIE) +119.0%
(+$2,621.25/$13,176.95)*(365/61 days)