Performance

Optimum Income Program

TEOW Program

The Newport Private Capital Technical Entry/Option Writing Trading Program is a program that focuses on the S&P 500 futures contract and options on those contracts. The program has been actively traded since December 2001. Technical analysis includes the study of charted prices, volumes, momentum, strengths, and moving averages.

The Advisor uses several proprietary technical tools to determine long term support and resistance price levels on the S&P 500 futures contract. The Advisor expects that the index will either reverse its trend at these levels or, at a minimum, see short term stagnation in price movement.

The advisor will use the technically determined Price Levels above and below the current price of the S&P 500 Contract to form the top and the bottom of what the advisor calls a “Profitability Box.” The left and right sides of the box are formed by taking the expiration date of the option and the day the trade was placed. The advisor anticipates that the S&P contract will close somewhere inside the box over the time period of the trade. A close inside the box on the expiration date of the contract results in a positive return for that trade. A graphic of the Profitability Box is located below.

Option Writing

Newport Private Capital sells naked put and call options against Proprietary Price Levels on the S&P 500 index. It is expected that most of these options will expire worthless at expiration because the options that the Advisor sells are generally significantly out of the money.

It is the Advisor’s opinion that by selling options at a pre-determined price level, the Advisor may enter or exit trades at a technically advantageous level that may result in a higher number of successful trades.

Selling Volatility

Time of entry into a trade is one of the most important elements of the trade decision. The Advisor will generally seek to sell options after large momentum days that have high volatility and broad price ranges. These types of trading days tend to create imbalance in the pricing of the options and allow for abnormal option premium to be captured at the time of the option sale.

In the Event of an Exercised Option

In the event that the market closes above or below a Pivot Point, it is possible for the counterparty to exercise his option. If this is the case, and the futures contract is actually put to the account or called away from the account, the Advisor will then utilize the same technical tools to determine logical profit objectives and buy or sell stop placement on the contracts that were delivered to the account

Position Size

The advisor will generally trade one futures contract for every $50,000 of committed capital in the program. This level equates to a general initial margin requirement of approximately 20%-40%. The execution of this program i.e., determining the prices of the options and which maturities are the most favorable, depends upon both technical and fundamental considerations. A hedging component is also used when the market closes above or below a significant moving average and the Advisor will hedge the options position by buying or selling contracts in the direction of the trend.

The management strategy is not a “black box” strategy that indicates a buy or sell signal. There is significant subjectivity involved by the Advisor in determining both entries and exits into futures and options positions.

The Advisor intends to trade futures and options on financial futures contracts, with an emphasis on the S&P 500 contract. No other commodities are traded in this program.

Margin Commitment

Assets committed to initial margin generally will range between 20%-40% of equity but at times margin commitments may be above or below that range.

Minimum Account Participation

The minimum account size for the Program is $100,000.

Fee Structure

Newport Private Capital charges a non-refundable monthly management fee of 1/12 of 1.5% and a 20% incentive fee charged on new net profits each quarter.