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Zenith
Resources
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Access This Page Directly:
http://zenith.altavra.com
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This
program is not currently available. For additional information, please
call 1-800-998-7870.
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Program Descriptions
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Uncovered Option Strategy
The objective of this strategy is to achieve
substantial capital appreciation through the
speculative trading of options on futures contracts.
This objective can entail a comparatively high level
of risk. Zenith Resources currently engages in
this strategy of selling or “writing” put and call
options on stock index futures in the Index Option
Program and V-Program. However in the
Diversified Option Program, Zenith Resources may
trade a broader portfolio of options and futures
contracts including agricultural, energies, metals,
currencies and financial instruments. Each of
Zenith Resources clients in the Index Option Program
and V-Program will receive advance notice, before
having their account traded in any other type of
commodity interests other than the stock index
futures and options. Zenith Resources may
trade commodity future and option contracts on any
United States exchange.
Zenith Resources uses a systematic approach to
trading, in that it relies heavily on a program of
selling or “writing” out of the money options.
Zenith Resources may also, from time to time;
purchase options to reduce risk exposure (see Credit
Spread Strategy). The implementation of the
program each month depends on two proprietary
formulas. They determine the strike prices and
maturity periods of the initial option positions,
which are written for each month’s expiration.
Considerations are also given to technical and
fundamental conditions in order to give the best
risk/reward possible in Zenith Resources opinion.
Option contracts are written at a sufficient
distance out of the money to allow, in most cases,
for the options to expire worthless.
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Credit Spread Strategy
An alternative option writing strategy is the credit
spread, which involves selling an option (see
uncovered option strategy) but also includes
purchasing another less expensive option. When
writing a credit spread the writer is “credited” the
difference between the premiums collected from
writing the option, less the cost of the option
purchased. Unlike writing uncovered options,
where the potential for unlimited loss exists,
option credit spread risk is absolutely limited to
the difference between the strike prices of the
options written and purchased, plus commissions and
fees. Any loss would be further reduced by the
amount of the credit received. While the
option credit spread clearly offers the advantage of
limited risk, the writer must sacrifice some of
their potential profit in exchange for acquiring a
limit to the risk.
Zenith Resources seldom initiates a credit spread,
but instead uses the credit spread strategy to
reduce risk and margin on uncovered option
positions.
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S&P Call Credit Spreads
An S&P futures credit spread involves selling an
option at a greater premium than the cost of the
option that is purchased, thereby creating a credit
to the trader writing the spread. A call
credit spread consists of writing a call and buying
another call, which has a higher strike price and
therefore is cheaper than the one written. If
a call spread is not closed prior to expiration,
then upon expiration, the strategy will be
profitable if the underlying S&P 500 futures price
is below the strike price of the call that was sold.
If the S&P 500 futures price rises above the strike
price of he written call at expiration, the strategy
may produce a loss. Thus, the profitability of
a trading strategy that focuses on credit spreads on
the S&P 500 futures contract depends upon the
underlying price movement of the S&P 500 futures
contract. In credit spreads, the loss is
limited to the amount of the difference between the
strike prices of the two options in the spread.
For example, if a call with a strike price of 800 is
written and a call with a strike price of 825 is
purchased, the maximum loss on the spread is 25
points, minus the original credit of the spread.
If the spread was originally put on for a credit of
5 points, the maximum profit generated, assuming the
spread expires worthless, would be 5 X $250 (cash
value of each full point in an S&P option contract)
= $1,250. On the other hand, the maximum
possible loss is 25 X $250 = $6,250 minus the
original $1,250 credit, or $5,000, plus commissions
and fees. Please see note below.
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S&P Put Credit Spreads
A put spread on the S&P 500 future involves writing
a put and buying another put which has a lower
strike price and is therefore cheaper than the one
sold. If the spread is not closed out prior to
expiration, the strategy will be profitable if the
S&P 500 futures price is above the strike price of
the put written when the spread expires. If
the futures price of the index is below the strike
price of the put when the put that was written
expires, the strategy may produce a loss. The
loss will be limited to the amount of the difference
between the strike prices of the two options in the
spread. For example, if a put with a strike
price of 750 is written and a put with a price of
725 is purchased, the maximum loss on the spread is
25 points, minus the original credit on the spread.
If this spread were originally put on for a credit
of 5 points, the maximum possible loss is 25 X $250
= $6,250 minus the original $1,250 credit, or $5,000
plus commissions and fees. The maximum profit
potential would be calculated the same as described
in the previous paragraph.
Both the call and put examples given above are
hypothetical and for illustration purposes only.
The actual difference between strike prices
actually used by Zenith Resources may be greater or
less than the ones in the example. Please see
note below.
Please note: Options and option credit spreads can
be liquidated before expiration with either a profit
or loss, based on market movement. Zenith
Resources utilizes a stop loss price, whereby a
short or written option is rolled to the next month
or liquidated at the time it becomes in the money.
It is Zenith Resources opinion that in most
instances of loss, the credit spreads will be closed
out by the stop loss price, at a loss substantially
less than the maximum spread loss described above.
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Management Information
Ed Padon is the President of Zenith Resources, Inc.
Mr. Padon is directly responsible for all trading
and money management decisions made by Zenith
Resources, Inc. (“Zenith Resources”).
Performance of accounts managed by Mr. Padon can be
found on page 10 of the disclosure document.
Mr. Padon attended Southwestern Adventist University
and graduated in 1982 with a BBA degree in
Accounting. Prior to entering the trading and
management business, Mr. Padon was president of a
construction and development company. The
company built and developed both residential and
commercial properties. Mr. Padon was involved
in the estimating, financing and construction
supervision of the projects. During this time
Mr. Padon accumulated and managed a number of rental
properties as well as three retail related
businesses. Mr. Padon was active in the
community and was elected a councilman for the city
of Keene, Texas. In 1982 Mr. Padon was chosen
as a member of Outstanding Young Men of America.
In 1990 Mr. Padon divested himself from his former
positions and holdings, in order to commit himself
full time to the markets.
Mr. Padon started in the commodity business in 1990
by trading his own accounts. Technical
indicators and bar charts were studied and utilized
for trading decisions. In December of 1995 he
became an “Associated Person” with Complete Price
Management and started opening and trading accounts
for others. In August of 1998 he opened a branch
office of Emery Commodities, which was named Zenith
Resources. On January 21, 2000, Zenith Resources
became an Introducing Broker (IB) of Peregrine
Financial Group. On December 31, 2003 Zenith
Resources moved its IB affiliation to Vision LP.
Mr. Padon is currently an Associated Person and the
President of Zenith Resources.
Mr. Padon has done extensive research in the
development of proprietary formulas, for use in the
trading of options on stock index futures.
After testing and legitimizing the formulas for use
in the S&P 500 futures options, the system has been
utilized to manage account(s) for three plus years.
Zenith Resources registered on July 14, 2003 as a
Commodity Trading Advisor, so that the system can be
introduced to and utilized by a larger number of
Clients.
Zenith Resources, Inc. (Zenith Resources) and its
President may trade commodity interests for their
own accounts; the records of such trading and any
written policies relating to such trading, will not
be made available to Clients for inspection.
The descriptions above are from the manager’s
disclosure document.
THE RISK
OF LOSS IN TRADING FUTURES, OPTIONS AND OFF-EXCHANGE
FOREX CAN BE SUBSTANTIAL. PAST RESULTS ARE NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS.
PLEASE READ THE CTA'S RISK DISCLOSURE DOCUMENT
CAREFULLY BEFORE INVESTING MONEY.
Disclosure Statement
This
program is not currently available. For additional information, please
call 1-800-998-7870.
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