Summary

Harbor Financial seeks to achieve capital appreciation by trading options and option spreads on stock index futures listed on the Chicago Mercantile Exchange. An options spread consists of the simultaneous sale and purchase of options of different exercise prices and/or expiration months. By trading options and options spreads, the Advisor seeks to profit in three ways: (1) Premium collection - this technique yields profits as sold options’ value declines over time. Profit is captured when sold options are repurchased at a reduced value, or when they expire worthless, allowing retention of the original sales proceeds; (2) Volatility Trading – market prices of options are dependent on observed and anticipated volatility of the underlying stock indexes. According to his trading system the advisor may enter options positions designed to profit from either an increase or a decrease in stock index volatility; and (3) Trend following – under certain conditions, the Advisor may enter options spreads which will profit from an established price trend. Central to the success of this strategy is the Advisor’s ability to predict the range of market movement over time frames ranging from thirty (30) to ninety (90) days. However, in general, the strategy does not depend on a prediction of equity market direction, and is designed to produce returns which are not correlated with equity market returns.