Crescent Bay Capital Management, Inc.

Premium Stock Index Program

CBCM's option strategy collects premiums by writing (selling) out-of-the-money options. The seller (writer) of the options risks losing the difference between the premium received for the option and the price of the underlying futures contract. Trades are usually made 45-30 days from expiration. The idea is to hold the option until expiration. This maximizes the return on the option by retaining all funds received in the account when the option was initially sold. The goal is to be profitable regardless of market direction. What is unique with CBCM's strategy is that historical prices are not used to establish positions. The majority of methods used by advisors is based on the assumption that historical price data can predict future prices. The use of historical price data has shown to be profitable, however, substantial drawdowns and low accuracy is generally the result. CBCM uses the future perceived value in its proprietary algorithms, derived from the current months option expiration, to determine the strike prices the options are sold. In addition, position sizing methods are employed to optimize returns and reduce risk.