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Option Strategist - Covered Call Strategy - Eurostoxx 50 Index (SX5E Index)
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Option Strategist - Covered Call Strategy - Eurostoxx 50 Index (SX5E Index)

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QMS Advisors brings investors a complete suite of cutting-edge tools, insightful daily reports and customized in-depth analyzes to assess your option-based strategies and screen the most appropriate …

QMS Advisors brings investors a complete suite of cutting-edge tools, insightful daily reports and customized in-depth analyzes to assess your option-based strategies and screen the most appropriate assets.


Implied Volatility Surfaces, Dividend Yields and Last Prices
•This service provides end-of-day information on any equity underlying (single equity names and equity indices) - such as any underlyings' price, annualized dividend yield estimates, and parametric implied volatility surface by terms (whether in a "raw" fomat or conveniently synthesized in a polynomial form by terms). Additionally, our daily reports can be fine-tuned to our investors needs, and also includes options volume and open interest along with ATM contracts, all associated greek calculations (delta, gamma, vega, rho, etc), correlations to any other assets, and more on demand. Free daily basic reports are available below.

Options Calculator
•Our Options Calculator brings you features that were previously available only for professionals. Utilize QMS Advisors real end-of-day market data, or customize all input parameters to price any option style.
•Our analyzes and calculators utilize real end-of-day market data (both market prices and fundamental information) which can save you a lot of time looking and calculating the correct initial information required to calculate fair option prices or implied volatilities. Additional data such as historical volatility, implied volatility for all options strikes and greeks, and time and volatility skew charts for all maturities are also available on demand. Contact us at info@qmsadv.com for additional information.

Option Strategist
•QMS Advisors' Option Strategist helps you find the best opportunities among Covered Calls and Naked Puts on a historical basis. Our systems help you single-out assets that have been the most relutive to specific options-based strategies and define the associated optimal strike levels and exercise probability. Our systems further calculate and graph performance and risk parameters on a stand-alone and total portfolio basis.
•Alternatively, our investors can formulate their desired expected payoffs, exercise probabilities, risk parameters, expirations, etc. and obtain fully customized systematic option strategies.
•Our reports include charting of historical information such as Implied and Realized Volatility, Correlation and Beta, Skew & Kurtosis, that help better visualize specific strategies' historical performance and stastistical parameters. This multiple charts approach allows investors to better determine interrelations between different indicators visually.
Volatility Relative-Value Analyzer
•Our Volatility Relative-Value Analyzer service helps you formulate trading ideas for overbought/oversold options and find appropriate options-based strategies. The system finds equities that have been impacted by changes in volatility and identifies those with the greatest in

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  • 1. Option Strategist Covered Call Strategy Euro Stoxx 50 Index February 2012 Q M S Advisors . .This material does not constitute investment advice and should not be viewed as tel: 078 922 08 77a current or past recommendation or a solicitation of an offer to buy or sell any e-mail: info@qmsadv.comsecurities or to adopt any investment strategy. website: www.qmsadv.com
  • 2. Option Strategist Covered Call Strategy Enhancing Long-Term Portfolio Performance whileGOAL Diminishing Risks in the Mean-Variance Space Asset Management: A highly competitive landscape anchored in the Mean-Variance space. Monetizing Volatility 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: 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
  • 3. Option Strategist Covered Call Strategy Euro Stoxx 50 Euro Stoxx 50Option Strategist- Covered Call: Covered Call Pr Ex-Div & Covered Call Pr Ex-Div & Euro Stoxx 50 ESTX 50 € Euro Stoxx 50Based on Historical Data from Jan Pr NRt Pr Ex-Div Strategy: Covered Call Strategy: 5% Covered Call16th 2006 to Jan 31st 2012 2.5% OTM Strategy: OTM Strategy: 5% 2.5% OTM OTMRendement 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 0.25Skewness Historique 0.06 0.06 0.06 -3.19 0.49 -4.11 0.38Kurtosis Historique 5.56 5.58 5.56 58.61 15.04 85.73 11.27Maximum 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%Beta au SX5T Index 1.000 1.000 1.000 -0.193 0.809 -0.130 0.872 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 | tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 2
  • 4. Option Strategist Historical Efficient FrontierBased on Historical Data from Jan 16st 2006 to Jan 31st 2012 20% 15% Historical Return (in % p.a.) 10% 5% 0% 0% 5% 10% 15% 20% 25% 30% -5% -10% -15% Historical Volatility (in % p.a.) ESTX 50 € NRt Euro Stoxx 50 Pr Euro Stoxx 50 Pr Ex-Div Covered Call Strategy: 5% OTM Euro Stoxx 50 Pr Ex-Div & 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 Page 3
  • 5. Option Strategist Covered Call StrategyRATIONALE In a historical mean-variance context, this strategies offers significantly higher Sharpe ratios Options offer portfolio managers unrivaled tools to enhance their performance and to better manage their risk exposures 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 | tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 4
  • 6. Option Strategist Performance Based on Historical Data from Jan 16st 2006 to Jan 31st 2012 350 300 250Growth of EUR 100.- 200 150 100 50 0 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 ESTX 50 € 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 Page 5
  • 7. Option Strategist Reduced Drawdown RisksBased on Historical Data from Jan 16st 2006 to Jan 31st 2012 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 0% -10% -20%Historical Drawdowns (in %) -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 € NRt Maximum Drawdown Euro Stoxx 50 Pr Ex-Div Ex-Dividends Maximum Drawdown Covered Call Strategy: 5% OTM Ex-Dividends Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 6
  • 8. Option Strategist Relative Risks and Tracking Error of the StrategyBased on Historical Data from Jan 16st 2006 to Jan 31st 2012 100% 100% 90% 90% Historical 30-Day Volatility and Tracking Error (in %) 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 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 | tel: +41 (0)78 922 08 77 | e-mail: info@qmsadv.com | website: www.qmsadv.com Page 7
  • 9. Option Strategist Relative Daily Distribution of Returns to the Benchmark Based on Historical Data from Jan 16st 2006 to Jan 31st 2012 10% 10% y = -0.1328x + 0.0007 D aily R etu rn s - S ys tem atic S ale o f 1-M o n th 8% 8%Daily Returns - Eurostoxx 50 Ex-Divs and R2 = 0.1557 6% 6% Covered Call Strategy (in %) 4% 4% 1 05% C alls (in % ) 2% 2% 0% 0% -10% -5% 0% 5% 10% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% -2% -2% -4% -4% -6% y = 0.8687x + 0.0007 -6% R2 = 0.8845 -8% -8% -10% -10% Daily Returns - Eurostoxx 50 Ex-Divs (in %) Daily Returns - Eurostoxx 50 Ex-Divs (in %) Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM 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
  • 10. Option Strategist Comparative Distribution of Returns to the Benchmark 30% 100% 30% 100%PDF: Probability Dist. Function (%) CDF: Cumulative Probability Dist. CDF: Cumulative Probability Dist. Function PDF: Probability Dist. Function (%) 90% 90% 25% 25% 80% 80% 70% 70% 20% 20% Function (%) 60% 60% 15% 50% 15% 50% (%) 40% 40% 10% 10% 30% 30% 5% 20% 20% 5% 10% 10% 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% 6.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 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 70% 100% 30% 100% CDF: Cumulative Probability Dist. PDF: Probability Dist. Function (%) CDF: Cumulative Probability 90% 90%PDF: Probability Dist. Function 60% 25% 80% 80% Dist. Function (%) 50% 70% 70% 20% Function (%) 40% 60% 60% 50% 15% 50% (%) 30% 40% 40% 30% 10% 30% 20% 20% 5% 20% 10% 10% 10% 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% 6.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Proba. Dist. F(). ESTX 50 € NRt Proba. Dist. F(). ESTX 50 € NRt Proba. Dist. F(). Covered Call Strategy: 5% OTM Proba. Dist. F(). Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM Cumul. Dist. F(). ESTX 50 € NRt Cumul. Dist. F(). ESTX 50 € NRt Cumul. Dist. F(). Covered Call Strategy: 5% OTM Cumul. Dist. F(). Euro Stoxx 50 Pr Ex-Div & 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 Page 9
  • 11. Option StrategistSimple and Transparent Approach to Tap Alpha SourcesCovered Call Strategies offer a simple, transparent and liquidalternative to tap the most recognized and documented source ofalpha: 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. Historically, the strategy has produced significantly higher returns with lower realized volatility when compared to the underlying security, resulting in attractive Sharpe ratios. 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