S.S. Advantage

Bond Option Program

Program Description: The Advisor employs discretionary proprietary techniques that utilize the prior trading experience and knowledge of the futures markets of its principal. He will rely on both fundamental and technical analysis. The fundamental analysis attempts to identify and predict the external factors affecting the market and how they shape the fluctuations within the marketplace. Dissemination of fundamental factors, news events and expectations for government economic numbers flow to the Advisor through his contacts within the industry and the trading floors; and their effect on the different markets and on present positions is analyzed and used to the best advantage in real time. The Advisor closely analyzes the effect of these factors on the price trends and chart patterns of the various markets, utilizing them to benefit or adjust strategies based on his futures and options trading experience. The Advisor selects combinations of futures and options which best express a desired market view while attempting to keep risk at a minimum. The Advisor's primary strategy is to sell uncovered straddles and strangles in the 30-Year U.S. Treasury Bond options on the Bond futures contract which is traded on the Chicago Board of Trade. The Advisor will trade the Bond futures to cover (hedge) options positions. A straddle strategy consists of establishing a market position by purchasing or selling of an approximately equal number of Bond put options and Bond call options at the same strike price and option month. A strangle strategy consists of establishing a market position by purchasing or selling an approximately equal number of Bond put options and Bond call options at different strike prices for the put options and call option. A covered straddle or strangle where the call and put options position is hedged to some degree by futures positions. Since the Advisor's primary strategy is to initiate a position by selling (not buying) uncovered Bond straddle and strangle options, the profit potential of this strategy is limited and the risk of loss is unlimited. This strategy is extremely risky.