Skot 2011 Report

SK Options Trading 9

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January 20111

2011 Report

Introduction

Now that 2011 has drawn to a close we will take a moment to review our trades for the year. Thisreport aims to summarise our trading strategies throughout the year, with full details given of alltrades closed in 2011.

If you acted on our trading signals the return on our letter is 11.73 times the fee paid, given a$10,000 portfolio.

Contents

1-Introduction2-Key Stats3-Review of Our Outlook for 20114-Getting Off To a Good Start5- Positioning For the Next Leg Up6- Getting Aggressive On Gold7-Japanese Tsunami9-No position is Still a Position11- Gold and Silver Correct, CME Hikes Margins13- The Value of Our Service

Our Performance Since Inception

SK Options Trading 9

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January 20112

Key Stats:

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32 trades closed in 2011.

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Model Portfolio increased by 40.95% based on the 32 trades closed in 2011.

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Each trade had an average return of 20.57% in 59.41 days in 2011.

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A $10,000 portfolio would have increased to $14,095.33 based on the 32 trades closed in2011.

SK Options Trading 9

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January 20113

Review of Our Outlook For 2011

In 2011 our main focus remained on gold and also silver, since those were the markets that we sawthe most trading opportunities. However we also executed profitable trades in other markets suchas US equities and treasuries, and we continue to monitor these markets for trading opportunities.Gold showed strong bullish fundamentals coming into 2011. The effects of QE2 were still being feltand although US real rates were increasing, a weak US dollar was supportive of higher gold prices.We set a target for gold of $1500 that we thought would be achieved in the first quarter of 2011,gold reached this target in mid April, but we did not see gold rallying significantly past this levelwithout further monetary easing. Not only do we risk our own capital in all the trades we signal, butwe also put our money where our mouth was by offering a full refund

to subscribers if gold didn’t

trading above $1500 in 2011.We continued to hold the view that gold stocks were a very poor way to invest in gold, a view wehave held since May 2008. We actively discouraged owning gold miners as a way to gain exposure tohigher gold prices and even suggested that a Long Gold/Short Gold Stocks pair trade would be a

good play. Our piece entitled“Are Gold Stocks The Real Barbarous Relic?”

details our reasoning forthis view. A Long GLD/Short GDX pair trade would have returned 26.2% during 2011, so we continueto feel vindicated in our view.We also believed that silver prices would enjoy a similar rise and therefore we planned to takesimilar positions on SLV. Whilst we largely avoid precious metal stocks, we considered SLW to be oneof the only companies that we would trade due to its unique business model. Therefore weconsidered purchasing some call options on SLW to complement, and add leverage to a silver

position. However we informed our subscribers that “...overall we are more comfortable with taking

gold positions, since we believe the metal has better technical support therefore when we do

undergo a correction, silver could be hit a great deal harder than gold”. Silver prices would go on to

correct by over 32% in May 2011, a correction we were fortunate enough to be largely protectedfrom.Our subscribers were informed that we did not

“...see a positive year for the global or US economy,

and the same goes for equity markets, unless we get another dose of quantitative easing which could