Optima Portfolio

California Investment Trust selects a portfolio of blue chip equities and then adds to that an actively managed covered option strategy in order to generate option premium and reduce overall volatility.

DESIGN:

Third party equity research and proprietary Optima analysis assist in identifying favorable call writing opportunities. Based on client’s stated objective and focus, California Investment Trust will sell call options on some or all of the equities in the portfolio. We may write calls out-of-the-money, at-the-money, or in-the-money and may in some circumstances buy put options.

IMPLEMENTATION:

Client completes an Investor Profile Questionnaire identifying factors such as risk tolerance and option premium target. Premium targets range from 6% to 12%. Client chooses a focus on “Enhanced Growth” (lower premium target with some upside potential), “Growth and Cash Flow” (moderate premium target with less upside potential), or “Cash Flow Focus” (higher premium with little upside potential). Additional levels of customization are available.

PROCESS & REVIEW:

Risk and return characteristics for all open option positions are monitored. As options expire, the process starts over. New options are sold, generating additional premium for client.

CONSIDERATIONS:

A covered call strategy limits upside potential for stock appreciation and will therefore underperform in strong markets. There are no assurances that we will be successful in reaching client’s premium target. A covered call 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 (long put option contracts provide some degree of downside protection if utilized). Withdrawals (such as systematic withdrawals as part of an income strategy) may result in a declining portfolio value over time.

IMPORTANT NOTES:

Optima is a discretionary call writing investment service of California Investment Trust. The above 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 Portfolio service should be willing to sell all of the stock under the Investment Advisory Agreement at the Strike Price. The Strike Price is the price at which a specific option contract can be excercised. 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 Portfolio 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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