INVESTMENT STRATEGY

Financial Investments, Inc. is under the assumption that the financial markets are currently fairly valued. The current earning power of corporations, the Gross National Product (GNP) of the country, the country’s productivity levels, and the value of currencies and commodities throughout the world, all are consistently fluctuating and are related in value to the financial markets. Historically, investors in the financial markets, have been able to use a passive “Buy and Hold” type of investment strategy with their investable assets. Returns recognized with this strategy, have historically been between 8 to 12 percent during the late 1990’s era. And because of overvaluations of the financial markets in the early 2000’s, investors using a “Buy and Hold” strategy, actually saw negative returns; sometimes as much as a 75 percent loss of capital.

The financial markets have historically generated long term returns of approximately 8 percent for passive investors in the market. Financial Investments, Inc. has the assumption and opinion, that returns from the financial equity markets will be substantially less during the next ten years. It is estimated that returns for “Buy and Hold” investors will likely be around three to seven percent, at best, on an annual basis, for the next ten years. These estimations are based on the premise, that financial equities are already fully valued, and that future productivity and profitability of underlying companies’, and countries’ GNP, will not be nearly as great as the historical results that have been generated, in the past, by these entities.

We have extensive research and knowledge in the area of the selling of far out of the money (OTM) options, of individual equities as well as financial index equity options. Historically, it has been determined, that ninety percent of the purchasers’ of options, are net losers on their purchased investment in options. The purchasing and selling of options, is also known as a “sum zero” game of investing. With the buying and selling of options, there is always a purchaser for every seller of options. Options also have a specific length of time till expiration. After this period of time, the value of the option either becomes, more valuable, less valuable, or many times, it expires worthless. The value of the option is dependent upon the volatility of the underlying asset, the price of the asset, and the length of time till expiration. Many of the purchasers of options, are making this investment merely as an insurance investment; allowing them to hedge their underlying assets from a substantial decrease in value. This is done as insurance to protect against a substantial increase or decrease of their underlying investment. Other purchasers of options of assets, are speculators. These speculators are playing calculated odds, assuming that an event may occur, causing a substantial shift in the value of an underlying asset.

Yet, the purchasers of options, either puts or calls, many times, have their investments expire worthless or of no value at the end of expiration. Historically, it is also shown, those options, that are far out of the money, and with an expiration of less then three to six months, have the greatest decrease in value over the shortest period of time. It is these options that have the greatest probability of expiring worthless, at the end of their expiration timeframe.

Financial Investments, Inc. has access to, real time pricing information, detailing the option pricing values and their underlying asset prices. The volatility of an underlying asset’s price, many times, will generate higher premium pricing for far out of the money short term options of the underlying assets. It is these higher premium options that many times can be sold, to the hedged purchasers, and speculators. Cash proceeds is called a premium. It is these premiums that are collected by selling these far out of the money, near term call and put options.

The real strategy to the selling of these options, is to make sure that the options being sold, are truly being sold and do generate commendable returns for investors, without the increased risk/return associated with the alternative investments.