Over the past several years investors saw significantly diversified market conditions. These highly volatile markets may have caused some jubilation when you reviewed your monthly brokerage statements. But many long term investors spent the past 5 years cringing in fear as they opened the envelopes. And many investors now have a drawer full of unopened envelopes - they don't even want to look.

PTI Securities & Futures clearly understands the struggles facing investors today. But there are alternatives to negative returns - and our Protected Index Program® is one of them. We have been utilizing this successful investment strategy for a decade and our track record reflects that we have beaten the S&P 500 during this time by upwards of 22.86%!

What is the key to the success of the Protected Index Program®? The answer is twofold, we are diversified and we are protected. The diversification comes by the investment in unit investment trusts, which are trusts comprised of large baskets of stocks. For example, the Spyder's, or SPY's, is a trust including all the stocks with the proper weightings of the S&P 500. The protection comes from always having a long term put, or LEAP, in place limiting the risk of a downside move in the underlying.

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Investment Philosophy

Are you confident in the future of the economy but unsure about individual companies? Worried about owning the next Enron, Lucent, Polaroid, Xerox, Cisco, or American Online? Do declines in broad market indices not fully reflect the declines in the equity value of your account? Do the events of the last few years make you less confident in traditional money managers’ ability to forecast a rocky road ahead? If you are having these thoughts, an alternative investment strategy designed and managed by PTI Securities & Futures may be for you.

Looking back at the investment debacle of the last eighteen months and the losses evident in the accounts of most investors, several issues become evident. The first issue is the difficulty in gaining a diversified portfolio in an account of even several hundred thousand dollars if the client is invested in individual stocks. Add to that the fact that some of the most widely held stocks, Lucent, Oracle, Cisco, took percentage hits far in excess of the market averages. Certainly from a portfolio management perspective it was next to impossible to avoid a customer portfolio without one or more stocks like Global Crossing, CMGI, or JDSU that lost virtually all their value. If one of these stocks was contained in a portfolio in a relatively high concentration, the results were disastrous. We at PTI believe that diversification is imperative to long-term success in investing, and should be a goal for the successful portfolio.

PTI has a strategy to achieve diversification in customer accounts of even modest amounts through the use of exchange traded unit investment trusts. These trusts trade like individual stocks all day, but really are trusts containing the entire basket of stocks making up a particular index. For example, the SPY, or Spiders, is a basket of all the stocks making up the S&P 500. The QQQ is a basket of all the stocks contained in the NASDAQ 100. In one trade we can achieve the diversification that is otherwise very difficult to achieve in individual customer accounts. We look to further the diversification process by using a blend of the S&P 500 and the QQQ. Unlike traditional mutual funds, the exact content of the trust is always known, and there are no hidden tax issues.

• The fund will significantly out perform the various averages in decreasing markets, both due to the put protection and the net call premium. The initial total risk in the portfolio is generally less than ten percent.

• The fund should out perform the averages in periods of small market movement, as the decay in the short call is greater than the decay of the long put.

The fund will under perform the averages in any month where prices appreciate more than the percentage out of the money of the calls sold. For example, if the calls sold were four percent out of the money, the strategy will begin to under perform if the averages appreciate more than four percent that month.

Sample Portfolio Unit:

The goal is to diversify the investment through the use of exchange traded unit investment trusts. Currently there is an ever increasing number of these products, but the most liquid are the SPY, containing the stocks of the S&P 500, and the QQQ, containing the stocks of the NASDAQ 100. We are also watching the growth of the CBOE’s new OEF product, containing the stocks of the S&P 100, as it may have advantages for the future.

In addition to the diversification achieved by the unit investment trust itself, we further that by using more than one trust. Along with the purchase of the trust shares, PTI selects through its proprietary timing model the optimum combination of long-term put insurance and shorter-term call sale. This model takes into account various factors, such as implied volatilities, interest rates, recent market moves, etc. In most cases the combination of the put and call will be selected to limit total risk on the initial investment to 10% or under. As the program advances this risk number will decrease as a percentage of the initial investment.

Long Term Objective:

On a long-term basis we believe that this strategy will equal or exceed the long-term return of the market averages, with much less total risk to the portfolio and much less month to month volatility. As such we believe this to be a superior core strategy for a wide range of individual and institutional investors.