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Thursday, March 12, 2009

iShares Russell 2000 Value Index ETF -- Continuation Transaction

The following transaction was made to establish a covered calls position against the 300 shares owned in iShares Russell 2000 Value Index ETF (IWN):
03/12/09 Sell-to-Open (STO) 3 IWN Mar09 $37s @ $.70

The transactions history to date is as follows:
01/21/09 Initial Stock Purchase Transaction -- Bought 300 IWN @ $42.56
01/21/09 Initial Calls Sold Transaction -- Sold 3 IWN Feb09 $45.00 Calls @ $1.60
02/21/09 Feb09 Options Expired
03/12/09 Sell-to-Open (STO) 3 IWN Mar09 $37s @ $.70
Note: The price of IWN was $36.20 today when the calls were sold.

The overall performance results(including commissions) for the IWN transactions are as follows:
Stock Purchase Cost: $12,776.95
($42.56*300+$8.95 commission)

Net Profit:
(a) Options Income: +$667.60 (300*($1.60+$.70) - 2*$11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged): -$1,916.95
= ($36.20-$42.56)*300 - $8.95 commissions
(d) Capital Appreciation (If exercised): -$1,676.95
= ($37.00-$42.56)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $36.20): -$1,249.35
= (+$667.60 +$0.00 -$1,916.95)
Total Net Profit(If stock price exercised at $37.00): -$1,009.35
= (+$667.60 +$0.00 -$1,676.95)

Absolute Return if Unchanged: -9.8%
Annualized Return If Unchanged (ARIU): -60.5%
(-$1,249.35/$12,776.95)*(365/59 days)

Absolute Return if Exercised: -7.9%
Annualized Return If Exercised (ARIE) -48.9%
(-$1,009.35/$12,776.95)*(365/59 days)