Summary

-GCM uses a systematic approach to trading, in that it relies heavily on a program of selling or ?writing? out-of-the-money options on the S&P 500 Stock Index. GCM may also, from time to time, purchase options on the S&P 500 Stock Index to reduce risk exposure during highly volatile market conditions. The implementation of the program will rely on both fundamental and technical analysis in order to give the best risk/reward possible. Option contracts are usually written on 3-4 weeks prior to option expiration dates in each cycle. The options traded will be at a sufficient distance, deep out-of-the-money to attempt to allow the options to expire worthless. GCM also implements strong risk management by repositioning options during extreme market conditions. In addition, an alternative option writing strategy is the credit spread, which involves selling an option as well as purchasing another less expensive option. When writing a credit spread, the writing is ?credited? the difference between the premium collected from writing the option, less the cost of the option purchased. Unlike writing uncovered options, where the potential for unlimited loss exists, option credit spreads risk is limited to the difference between the strike price of the option written and the purchased, plus commission and fees. The option credit spread offers the advantage of limited risk but also reduces the potential gain. GCM will implement this strategy during highly volatile market conditions to reduce both risk and margin requirement.