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SciVest Options Writing Income Overlay Program

Qualified investors may elect to participate in the SciVest “Options Writing Income Overlay Program.” The Options Writing Income Overlay Program is an overlay options strategy applied on “top” of the core SGDI Strategy investment portfolio with an objective to moderately enhance the core portfolio’s income and capital gains. That is, the Options Writing Income Overlay Program implements two equity options selling (or writing) programs from which the SGDI Strategy portfolio receives option premiums.

Specifically, the Options Writing Income Overlay Program implements:

  1. A selective “covered call writing program” whereby generally out-of-the-money call options are written (sold) against select existing individual stock holdings within the SGDI Strategy portfolio. In return for the call option premium received on the sale of the option, the SGDI Strategy portfolio is obligated to sell the underlying stock from the SGDI Strategy portfolio if on the expiry date of the option the price of the stock is above the strike price of the call option. Cover calls are selectively and opportunistically written on stocks within the SGDI Strategy portfolio which SciVest is not averse to selling at a higher price; and
  2. A selective “put writing program” whereby generally out-of-the-money put options are written (sold). In return for the put option premium received on the sale of the option, the SGDI Strategy portfolio is obligated to buy the underlying stock if on the expiry date of the option the price of the stock is below the strike price of the call option. Puts are selectively and opportunistically written on stocks that SciVest is not averse to buying at a lower price.

On a notional basis, this covered call writing and put writing programs are generally undertaken (each) on less than 15% of the SGDI Strategy portfolio on a notional basis (depends upon client specific mandate).

The put writing program may be implimented using: (i) a “cash-covered” put writting program whereby enough cash is held with the SGDI Strategy portfolio to cover all potential put assignments; or (ii) maintaining a near fully invested SGDI Strategy portfolio (thereby maximizing dividend income) which may result in the GDI Strategy portfolio becoming marginally leveraged for short periods of time. In the later scenario, SciVest generally brings the GDI Strategy portfolio back to near fully invested within several weeks, with the objective to have the core GDI Strategy portfolio almost fully invested in most market environments.

The SciVest Options Writing Income Overlay Program’s objective is to moderately enhance the core GDI Strategy portfolio’s income and capital gains. The Program enhances income through collecting options premiums when selling covered call options and put options. The Program enhances capital gains by being actively opportunistic in terms of which stocks to write options, when to write such options, the strike prices at which the options are written, and periodically when to cover outstanding written options.

While the SciVest Options Writing Income Overlay Program is expected to moderately enhance the core GDI Strategy portfolio’s income and capital gains in the long-term, the Program does significantly increase the turnover of the core GDI Strategy investment portfolio (due to option assignments) thereby increasing trading costs and capital gains taxes, if applicable.