Concentrated Stock

Optima is an actively managed service designed to enhance cash flow and improve risk adjusted total return. Optima, a professionally managed covered call-writing service, attempts to increase the cash flow on a stock position by 2% to 6%, with the potential for additional cash flow depending on the client’s investment objectives and a stock’s individual characteristics.

The Optima service is tailored to the specific objectives of the client, providing a potent combination of investment management expertise and options valuation technology.

DESIGN:
- Consider the client’s investment objectives, including: time frame, risk tolerance, and cash flow criteria.
- Determine the stock and option characteristics, such as: dividend yield, option market liquidity, interest rate levels, implied volatilities, and other factors current at that specific time.

IMPLEMENTATION:
- Identify the most favorable call writing opportunities based on a specific cash flow objective or target stock price.

PROCESS & REVIEW:
- Risk and return characteristics for the open option positions are monitored.
- As options expire, the process starts over.
- New options are sold, generating additional premium received.

CONSIDERATIONS:
- Limits upside potential for stock appreciation.
- If the stock is called away, substantial capital gain taxes could be incurred.
- There are no assurances that the revenue received from Optima will exceed fees.
- Does not protect a stock from downside risk. The loss for the investor could be the current price of the stock less the premium received for the call option.

IMPORTANT NOTES: Optima is a discretionary call writing investment service of California Investment Trust. This brochure is intended to describe generally how the Optima service works, but it is not a complete description of Optima or how California Investment Trust performs its investment management responsibilities.

All analysis and projections depicted herein are for illustration only, and are not to be representations of generalized Optima performance or expected results. Past performance is not a guarantee of future results. Supporting documentation for any claims, comparisons, recommendations statistics or other technical data will be furnished upon request to California Investment Trust.

The upside potential of fully written call option positions is limited to the strike plus the premium received. Unless the position is closed, the client relinquishes any upside potential above the call strike price. The downside protection afforded by call writing is limited to the amount of the premium received. If the stock held by the client declines significantly, the only protection will be the premium received.

Clients subscribing to the Optima service must be willing to sell all of the stock at the Target Price. Target Price is defined by the client and is the value at which the client is willing to liquidate the stock position. In calculating whether the target price was met, the sales price of the stock and the bid premium received is included. Neither the Cash Flow Target nor the Target Price are guaranteed. The sale of stock will produce tax consequences for U.S. taxpayers. Each option transaction also produces a tax consequence. Prior to undertaking the Optima service, you should discuss with your tax advisor how the option transactions and any sales of underlying stock will affect your tax situation. California Investment Trust does not provide tax advice.

Option trading is not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your Investment Advisor, from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr., Suite 500, Chicago, IL 60606 (1-800-678-4667).

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Concentrated Stock