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Former Short Position - SCFSInitial Cover-Stop was established off the hilltop resistance points which were above the 30wk moving average (Risk Corridor = 14.7%). The next valley-bottom occurred at 10/4/02 as confirmed upon the third subsequent increase in closing price on 11/1/02. The next hilltop occurred on 11/22/02 as confirmed upon third subsequent decrease in closing price on 12/13/02. Since the 11/22 hilltop was above the 30wk moving average, we used the hilltop value ($22.32) rounded up to the nearest dollar ($23) so no adjustment was made to the Cover-Stop. The next valley-bottom occurred at 12/20/02 as confirmed upon the third subsequent increase in closing price on 1/10/03. The 1/10/03 confirmation also served as the next hilltop as confirmed upon third subsequent decrease in closing price on 2/7/02. Since the 1/10 hilltop was below the 30wk moving average, we adjusted the Cover-Stop to the 30wk level ($21.01, rounded up to the nearest dollar) at $22. From that point forward, Cover-Stops are adjusted downward in $1 increments in tandem with the 30wk. 6/1/03: First Cover-Stop violation. A loss of 1.8% on this transaction. Half of our original position is still alive. 6/8/03: Second Cover-Stop violation. A loss of 3.2% on this transaction bringing the cumulative realized loss so far on this one to 2.2%. One quarter of our original position is still alive. 6/15/03: No doubt -- it was time to get out -- received a Cover Configuration Signal AND a 3rd and final Cover-Stop violation. Lost 2.0% on this final transaction bringing our cumulative final realized loss on this issue to 3.9% after accounting for dividends. Can't win 'em all -- but it is comforting to know when to get out in such cases when things don't go as planned. This is risk reducton at its best.
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