Option Strategist Covered Call Strategy Option Strategist

Option Strategist Covered Call Strategy Option Strategist – EUROSTOXX 50 Index February 2012

Q M S Advisors .

This material does not constitute investment advice and should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy.

.

tel: 078 922 08 77 e-mail: info@qmsadv.com website: www.qmsadv.com

Option Strategist Covered Call Strategy Enhancing Long-Term Portfolio Performance while Diminishing Risks in the Mean-Variance Space

GOAL

¢

Asset Management: l

¢

Monetizing Volatility l

¢

A highly competitive landscape anchored in the Mean-Variance space.

Significant potential enhancement of performance • Increased potential underlying asset’s returns via volatility monetization • Reduced risks in the mean-variance space

Transparent, flexible and actionable strategies: l l

Systematic management: • “Passive” investment strategy that requires no investment timing decision.

Allocation decision: • Overlays: solutions with minimal impact on a strategic asset allocation.

• Dedicated allocation: Certificates, Structured Products, etc…

Q.M.S Advisors

| tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com

Page 1

Option Strategist Covered Call Strategy Option Strategist- Covered Call: Based on Historical Data from Jan 16th 2006 to Jan 31st 2012

Covered Call Euro Stoxx 50 Strategy: Pr Ex-Div 2.5% OTM

Euro Stoxx 50 Euro Stoxx 50 Pr Ex-Div & Covered Call Pr Ex-Div & Covered Call Strategy: 5% Covered Call Strategy: OTM Strategy: 5% 2.5% OTM OTM

Euro Stoxx 50 Pr

ESTX 50 € NRt

Rendement Historique

-9.57%

-6.76%

-9.57%

18.31%

6.99%

17.19%

5.98%

Volatilité Historique

26.05%

26.03%

26.05%

11.23%

23.40%

8.53%

24.05%

Rendement/Risque

-0.37

-0.26

-0.37

1.63

0.30

2.01

0.25

Skewness Historique

0.06

0.06

0.06

-3.19

0.49

-4.11

0.38

Kurtosis Historique

5.56

5.58

5.56

58.61

15.04

85.73

11.27

Maximum Drawdown

-64.1%

-62.5%

-64.1%

-23.1%

-37.3%

-16.0%

-40.1%

Tracking Error au SX5T Index

0.63%

0.00%

0.63%

32.64%

11.34%

30.44%

8.64%

Correlation au SX5T Index

100.0%

100.0%

100.0%

-44.7%

90.0%

-39.6%

94.4%

1.000

1.000

1.000

-0.193

0.809

-0.130

0.872

Beta au SX5T Index

Attractive historical statistical features ¢

Each strategy offers attractive statistical features whether considered on a standalone or total portfolio basis, and this despite the extreme market environment considered in our analysis.

Source: Bloomberg, QMS Advisors

Q.M.S Advisors

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Page 2

Option Strategist Historical Efficient Frontier Based on Historical Data from Jan 16st 2006 to Jan 31st 2012 20%

Historical Return (in % p.a.)

15% 10% 5% 0% 0%

5%

10%

15%

20%

25%

30%

-5% -10% -15% Historical Volatility (in % p.a.)

ESTX 50 â‚Ź NRt Euro Stoxx 50 Pr Ex-Div Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM

Q.M.S Advisors

Euro Stoxx 50 Pr Covered Call Strategy: 5% OTM

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Page 3

Option Strategist Covered Call Strategy In a historical mean-variance context, this strategies offers significantly higher Sharpe ratios

RATIONALE

¢

Options offer portfolio managers unrivaled tools to enhance their performance and to better manage their risk exposures l

l

l

Multiple passive option-based investment strategies have offered and offer more attractive return and risk profiles in a mean-variance context than traditional passive investment strategies on similar underlying assets.

• Covered call strategies consist in systematically selling one-month out of the money calls and rolling those positions at expiry. This systematic approach does not require any decisions in terms of market timing.

Covered Call strategies offer attractive payoff profiles: • Historically offered higher investment performance • Display asymmetric payoff profiles • Offer lower variance and drawdown risks Though passive and implemented in a mechanical manner, this strategy dominates the efficient frontier on a historical basis.

Q.M.S Advisors

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Page 4

Option Strategist Performance Based on Historical Data from Jan 16st 2006 to Jan 31st 2012

350

250 200 150 100

ESTX 50 â‚Ź NRt

Euro Stoxx 50 Pr

Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM

Covered Call Strategy: 5% OTM

Q.M.S Advisors

| tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

Jan-09

Oct-08

Jul-08

Apr-08

Jan-08

Oct-07

Jul-07

Apr-07

Jan-07

Oct-06

Jul-06

0

Apr-06

50

Jan-06

Growth of EUR 100.-

300

Page 5

Option Strategist Reduced Drawdown Risks Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

Jan-09

Oct-08

Jul-08

Apr-08

Jan-08

Oct-07

Jul-07

Apr-07

Jan-07

Oct-06

Jul-06

Apr-06

Jan-06

Based on Historical Data from Jan 16st 2006 to Jan 31st 2012

0% -10%

Historical Drawdowns (in %)

-20% -30% -40% -50% -60% -70% -80% -90% -100% Maximum Drawdown Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM Ex-Dividends Maximum Drawdown ESTX 50 â‚Ź NRt Maximum Drawdown Euro Stoxx 50 Pr Ex-Div Ex-Dividends Maximum Drawdown Covered Call Strategy: 5% OTM Ex-Dividends

Q.M.S Advisors

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Page 6

Option Strategist Relative Risks and Tracking Error of the Strategy

Jan-12

Oct-11

Jul-11

0% Apr-11

0% Jan-11

10%

Oct-10

10%

Jul-10

20%

Apr-10

20%

Jan-10

30%

Oct-09

30%

Jul-09

40%

Apr-09

40%

Jan-09

50%

Oct-08

50%

Jul-08

60%

Apr-08

60%

Jan-08

70%

Oct-07

70%

Jul-07

80%

Apr-07

80%

Jan-07

90%

Oct-06

90%

Jul-06

100%

Apr-06

100%

Jan-06

Historical 30-Day Volatility and Tracking Error (in %)

Based on Historical Data from Jan 16st 2006 to Jan 31st 2012

30-Day Historical Volatility Euro Stoxx 50 Pr 30-Day Historical Volatility Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM 30-Day Tracking Error btw Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM to Euro Stoxx 50 Pr 30-Day ATM Implied Volatility - Euro Stoxx 50 Pr Ex-Div

Q.M.S Advisors

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Page 7

Option Strategist Relative Daily Distribution of Returns to the Benchmark 10%

10%

8%

8%

6%

6%

4% 2% 0% -10%

-5%

-2%

0%

5%

10%

-4% -6% -8%

y = 0.8687x + 0.0007 R2 = 0.8845

-10% Daily Returns - Eurostoxx 50 Ex-Divs (in %) Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM

Daily Returns - Systematic Sale of 1-Month 105% Calls (in %)

Daily Returns - Eurostoxx 50 Ex-Divs and Covered Call Strategy (in %)

Based on Historical Data from Jan 16st 2006 to Jan 31st 2012

y = -0.1328x + 0.0007 R2 = 0.1557

4% 2% 0% -10%

-8%

-6%

-4%

-2%

-2%

0%

2%

4%

6%

8%

10%

-4% -6% -8% -10% Daily Returns - Eurostoxx 50 Ex-Divs (in %) Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM

Attractive historical performance ¢ Covered call strategies introduce minimal tracking error to the underlying security ¢ Daily returns generated by the short call position have almost systematically been negatively correlated returns to the underlying’s returns Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com

Page 8

Option Strategist CDF: Cumulative Probability Dist. Function (%)

50% 40%

10%

30% 20%

5%

10% 5.0%

4.0%

3.0%

2.0%

1.0%

0% 0.0%

0%

Proba. Dist. F(). ESTX 50 € NRt

Proba. Dist. F(). Euro Stoxx 50 Pr

Proba. Dist. F(). ESTX 50 € NRt

Proba. Dist. F(). Euro Stoxx 50 Pr

Cumul. Dist. F(). ESTX 50 € NRt

Cumul. Dist. F(). Euro Stoxx 50 Pr

Cumul. Dist. F(). ESTX 50 € NRt

Cumul. Dist. F(). Euro Stoxx 50 Pr

Proba. Dist. F(). ESTX 50 € NRt Proba. Dist. F(). Covered Call Strategy: 5% OTM Cumul. Dist. F(). ESTX 50 € NRt Cumul. Dist. F(). Covered Call Strategy: 5% OTM

Q.M.S Advisors

CDF: Cumulative Probability Dist.

Function (%)

6.0%

5.0%

4.0%

3.0%

2.0%

0% 1.0%

0% 0.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

-1.0%

-2.0%

-3.0%

-4.0%

-5.0%

0% -6.0%

0%

5%

-1.0%

10%

10%

-2.0%

20%

15%

-3.0%

30%

20%

-4.0%

40%

25%

-5.0%

50%

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% -6.0%

60%

30% PDF: Probability Dist. Function (%)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10%

CDF: Cumulative Probability Dist. Function (%)

70% PDF: Probability Dist. Function (%)

60% 15%

-6.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

-1.0%

-2.0%

-3.0%

-4.0%

0%

10% 0%

-5.0%

5%

30% 20%

70%

20%

-1.0%

10%

80%

-2.0%

50% 40%

90% 25%

-3.0%

15%

100%

-4.0%

20%

70% 60%

30%

-5.0%

25%

90% 80%

PDF: Probability Dist. Function (%)

100%

CDF: Cumulative Probability Dist.

Function (%)

30%

-6.0%

PDF: Probability Dist. Function (%)

Comparative Distribution of Returns to the Benchmark

Proba. Dist. F(). ESTX 50 € NRt Proba. Dist. F(). Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM Cumul. Dist. F(). ESTX 50 € NRt Cumul. Dist. F(). Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM

| tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com

Page 9

Option Strategist Simple and Transparent Approach to Tap Alpha Sources ¢

Covered Call Strategies offer a simple, transparent and liquid alternative to tap the most recognized and documented source of alpha: l

Covered call strategies are an easy and efficient way to monetize volatility: an approach that offers mechanical investment protocols with clear statistical return characteristics, and attractive historical track-records.

l

Historically, the strategy has produced significantly higher returns with lower realized volatility when compared to the underlying security, resulting in attractive Sharpe ratios.

l

Covered Call strategies are structurally short volatility strategies that allows investors to exploit one of the very few sources of academically recognized and widely documented market inefficiency, that is the non-convergence between implied and realized historical volatilities.

Q.M.S Advisors

| tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com

Page 10