FAC FAC Equity Yield Plus (EYP)
OPTIONS TRADING STRATEGY
FAC First Advisors Capital®, Inc. A Registered Investment Advisor
PORTFOLIO FACTS As of 03-31-2017
• Inception Date: 08-08-2015 • Minimum: $250,000 (CAFT)* • Offering Type: Proprietary • Methodology: Long/Short, Options Based • In Kind Assets Accepted: Yes • Type of Accounts: Qualified/Non-qualified PORTFOLIO MAKE UP
1ST QUARTER 2017
FAC Equity Yield Plus (EYP) A Low Market Exposure, High Frequency Compounding Alternative to Equity Income Investing Ove r vi e w First Advisors Capital, Inc. (FAC) Equity Yield Plus (EYP) is a meaningful and much needed solution for those seeking retirement income and also as an alternative for clients who have a lower tolerance for risk, but still wish to protect their future purchasing power. This unique proprietary methodology offers much lower direct market exposure, and more frequent compounding than traditional buy-and hold dividend stock investing. These unique attributes attempt to provide returns that are both, less volatile, but most importantly, void of large direct market drawdowns that can be so detrimental to clients seeking income and/or those with zero time horizons.
Investment Philosophy We believe market volatility can be efficiently addressed through the selling of options (cash secured Puts on high-quality dividend stocks, and Vertical Spreads on SPX). Options applied by professionals, which includes higher compounding frequencies of any realized gains, though not guaranteed, attempt to provide more risk control, and far less direct market exposure. EYP attempts to expose the client to much shorter market cycles (average contract length less than 30 days), and more favorable pricing conditions than are traditionally associated with buy and hold dividend investing.
The Power of Negative Returns
• Individual Stocks (Secured Puts)
One of the primary goals of investors is to generate returns. However, many investors fail to realize the impact that withdrawals and negative performance have on their portfolio. Most investors do not understand the difference between simple and compounding returns. The bottom line is; after incurring a loss or withdrawal, the percentage gain required to break even is significantly higher than the initial loss or withdrawal itself.
• Vertical Spread Options: Index (SPX)
Why Sequence Matters
Capitalization: LCV/MCV Average No. of Holdings: 10–20
• Market Correlation: Agnostic • Beta: .2030
The industry has long taken a logical, linear, largely simplistic, approach in their advice to pre-retirees: systematically draw-down assets to finance retirement. Many people in the financial planning industry naively think that if they use historic averages then everything will be fine in the long run. Unfortunately, this is not the case. There is ALWAYS a permanent loss due to fluctuations in a distribution portfolio. In many cases, this loss can cut the portfolio life by half of what a standard retirement calculator predicts using average growth rate.
• Average Market Exposure: 17.84%
Examples
R I S K M E T R I C S 6 (AT RISK LEVEL 1)
SPX: 1
SPX : 100%
If there are no distributions, and a portfolio loses 10%, you must eventually gain 11.1% to break even. However, if you are taking 6% annual distributions while this net 10% loss is experienced, you must gain +30% over the next 3 years just to break even! Routine losses of just 10% are very real and periodically spread out over one’s retirement, can ruin a retirement plan for good because of these Time Value of Fluctuations. While taking a 6% annual distribution, a market loss of 20% requires 51% gain and a loss of 30% requires a 74% gain EVERY YEAR for 3 straight years!
• Sharpe Ratio: 2.507 SPX: 0.78
• Standard Deviation 4 : 3.71
SPX Standard Deviation: 10.36
Equity Yield Plus (EYP) High Cash Holdings
PLATFORM
• Custodian: • Daily performance analytics available upon request
As they say, Cash is King, and EYP proves this. When you actually implement your precious cash, can be even more important from an overall market prospective, as what you are investing in. EYP’s managers hold the majority of the portfolio in cash pursuant to taking shorter term positions. EYP attempts to maintain the lowest market exposure possible, in pursuit of respective targeted returns.
The Bottom Line for your Retirement Dollars Routine losses over a few years can permanently ruin a retirement plan, because of the Time Value of Fluctuations, and the Power of Negative Returns. As a matter of fact, you don’t need to have any losses at all in your portfolio to run out of money. If a portfolio grows less than the original projection, just for one market cycle (typically four or five years) at the beginning of retirement, the likelihood of ever catching up with the original retirement projection will diminish to near zero.
• Type: Non-transactional/Asset Based • Annual Platform Cost: 20bps *Cash Ava ilable For Trading ®
w w w.m y f a c .com For additional disclosures on advisor fees please review FAC’s or your advisor’s most recent Investment Advisory Fee Schedule. Please review with your advisor your particular risk profile. Fees are deducted annually on a quarterly basis in advance. First Advisors Capital, Inc. is a registered trademark, all rights reserved. It is strictly prohibited to use any information contained in this fact sheet without express written consent.
NOT FDIC INSURED/NO BANK GUARANTEES/MAY LOSE VALUE
You Do Have a Choice FAC’s Equity Yield Plus (EYP) offers a meaningful professionally managed solution for retirees in today's current market environment of high stock valuations, low interest rates, and uncertain global systemic risks. Today’s global environment has forced retirees into risk assets at a higher rate than ever before in history. However, retirees do have a choice as EYP’s risk mandates of high cash holdings, low market exposure, high frequency compounding, serves as a meaningful solution for retirees, when used as a core component of an overall diversified income portfolio. 04182017a
FIRST ADVISORS CAPITAL®, INC. EQUITY YIELD PLUS (EYP)
Three Level of Distinct Market Exposures and Target Returns 5,6,7
EYP is offered within 3 distinct targeted risk/return contract multiples*, as it pertains to market exposure, thus allowing clients to tailor their risk exposure within their specific income needs, all the while enjoying total liquidity and zero direct interest rate risk. This allows clients to be far more specific in their funding and distribution goals without the open-ended market exposure, liquidity and interest rate issues of traditional Equity Income investing. TARGETED MARKET
NET TARGETED ANNUAL
EXPOSURE RANGE6
ROR RANGE1,2,5
1
0–10%
6–9%
2
1.5
0–20%
9–15%
3
2
0–30%
18–21%
RISK LEVEL8, 9
CONTRACT MULTIPLE9
1
*Controlling risk is paramount to this methodology. Vertical spreads are initially scaled in at 1–2% +/– of any one portfolio at Risk Level 1. Higher exposures may occur in certain instances pursuant to any required contract mitigation(s). Available Contract Multiple Risks: LEVEL 1: APPROXIMATELY 2% +/– MAXIMUM EXPOSURE PER VERTICAL SPREAD PAIRING, 2-4% FOR CASH SECURED PUTS ON HIGH QUALITY DIVIDEND STOCKS. ACCOUNT PER CONTRACT PAIRING*. LEVEL 2: 1.5X LEVEL 1. LEVEL 3: 2X LEVEL 1. Increasing contract risk multiples will increase both market exposure, beta, risk, and possibly returns. Please see EYP's Performance Analytics which is available at www.myfac.com on a monthly basis for actual risk and return metrics of this methodology's trading block. Please contact your advisor for additional information on these additional risk offerings.
It is important to understand that FAC’s strategy will participate to a lesser degree with overall market movements, both up & down. Though none of these strategies are guaranteed, they are intended to be less market correlated & more likely to produce consistent low volatility returns that are actually realized at the end of each contract period, which averages less than 30 days. EYP's goal is to meet our target returns with as little market exposure as possible. EYP should be considered as a core holding, pursuant to income and time horizon needs.
3-31-2017
HISTORICAL RETURNS & AVG. MARKET EXPOSURE PER CONTRACT RISK LEVEL1,2,5 All returns include maximum platform and advisor fees Period Returns %
Risk Level 1
Risk Level 2
Risk Level 3
S&P 500 Index w/o fees
1 Mo.
1.10
1.65
2.20
0.13
3 Mo.
1.14
1.71
2.28
5.92
6 Mo.
1.88
2.82
3.76
10.11
9 Mo.
4.09
6.14
8.18
14.27
YTD
1.14
1.71
2.78
5.92
1 Yr. Rolling
7.86
11.79
15.72
17.07
2 Yr.
N/A
N/A
N/A
N/A
3 Yr..
N/A
N/A
N/A
N/A
Since Inception 08-18-2015
8.08
12.12
16.16
16.47
Avg. Market
17.84
26.76
35.68
100
Exposure3 %
1. FAC rates of return for Equity Yield Plus (EYP) are derived directly from an actual client account statements provided by TD Ameritrade within the Trading Block of EYP. Historical returns utilize Holding Period Return calculations. All returns include the reinvestment of dividends and other realized gains or losses including the collection of net debit or credit options premiums. Partial year returns are cumulative, not annualized. 1 year annual returns are based on 12 month rolling periods. Multiple year returns are based on average calendar year returns. These returns include the deduction and compounding of MAXIMUM platform, management, and ADVISOR fees. Lower fees may be available, depending on, but not limited to: account balance size, sub- advisory and client advisory agreements. PLEASE REVIEW YOUR ADVISOR’S CLIENT FEE SCHEDULE FOR YOUR ACTUAL COSTS, WHICH MAY BE THE SAME OR LESS THAN THOSE INCLUDED IN THESE POSTED HISTORICAL RETURNS.
2. Every attempt by management is made to remain consistent with EYP’s methodologies especially when addressing risk mandates, however, future market conditions, objectives may change materially in the future compared to the past time periods, this may affect future results of your investment account versus these posted past results. Other conditions that may affect returns include, but are not limited to: start dates, account balance, Sub-advisory / client advisory agreements, withdrawal/deposit frequencies, non-managed holdings, cash maintenance requirements, block trade synchronization, options contract mitigation, and taxes. 3. Average Market Exposure is based most recent rolling 12-month period. FAC provides, the results to the S&P 500 Index total Holding Period Returns over the same time periods without the deduction of Fees and the market exposure is 100%. The S&P 500 Index is the sole property of Dow Jones/McGraw Hill. 4. Even though every attempt by management is made to keep EYP’s methodology consistent, past returns may contain securities or strategies that management may no longer utilizes due to present market conditions that may affect your future returns and market risk / volatility, verses these posted results. These attributers may include but are not limited to: Contract mitigation, 100 round lot option exposure respective of individual account balance, client selected risk exposure, advisory fee agreements, account deposit synchronization within the managed block, deposits / withdrawal frequency, and taxes. 5. OPTIONS STRATGIES ARE NOT GUARARNTEED, INVOLVE MARKET RISK, INCLUDING PERMENENT LOSS OF PRINCIPLE There may be additional risks involved in the use of options for hedging and other strategies. It is vital that investors understand these methodologies fully before engaging in options trading. Prior to participating in this offering, investors must receive a copy of Characteristics and Risks of Standardized Options. Copies of this and other required disclosures are available through your FAC representative. 6. RISK METRICS: All statistical metrics for EYP are calculated by FAC, and are based on Since Inception Date 08-18-2015. Market Correlation: the degree to which two securities move in relation to each other. Beta: The tendency of a security’s returns to respond to swings in the market vs a comparable Index or other chosen benchmark. Market Exposure: The dollar amount or respective percentage of overall portfolio invested in a marketable security, option contract, market sector or industry. Sharpe Ratio: is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Standard Deviation is a measure of the dispersion of a set of data from its mean; more spread-apart data has a higher deviation, and is calculated as the square root of variance and is applied to the annual rate of return of an investment to measure the investment’s volatility. SPX Risk Metrics based on 3 Yr. Avg., provided by MorningStar®. 7. Risk mandates are paramount to this methodology but are NOT GUARANTEED. EYP, will hold high average CASH account balances and is intended to provide targeted returns utilizing the lowest possible market exposure. Though results are not guaranteed, by mandate, returns will NOT be directly correlated to the overall market including EYP’s comparable index. 8. Vertical (Call and or Put) Spreads as well as Cash Secured Puts on high quality dividend stocks, may be utilized together or separately, however individually, they are initially scaled in at 1-3 % +/– of any one portfolio with an overall portfolio exposure of 10%* +/-at Risk Level 1*. Higher exposures may occur in certain instances pursuant to any required contract mitigation(s)*which may increase the portfolios overall exposure depending on the effect of the material market or economic conditions which could result in management closing out contracts at a loss verses accepting continued risk exposure. 9. THREE Available Contract Risk Multiples: LEVEL 1*: APPROXIMATELY 4% +/– MAXIMUM EXPOSURE PER ACCOUNT PER OPTION CONTRACT PAIRING OR CASH SECURED PUT. LEVEL 2: 1.5X level 1. LEVEL 3: 2X level 1. Increasing contract risk multiples will increase market exposure, and thus beta, risk to principle, market risk / losses and possible returns. This information is believed to be accurate, but has not been independently verified. Past performance is no guarantee of future results. Investing involves risk including the permanent loss of principle. There is no guarantee that these methodologies and offerings that FAC manages will perform better than any other comparable methodology, offering or index. Please review your Investment Advisory Services Agreement, ADV 2a /2b, Fee Schedules and Custodial Disclosures including Characteristics and Risks of Standardized Options before investing. F irs t Advisors Ca pita l®, In c. • 4 95 6 Valle y d ale Ro ad S u i t e • 2 0 3 B i r m i n g h a m , A l a ba m a 3 52 4 2 • 1 - 86 6 - 3 53- 84 84 • su ppor t @my fac.com F ir s t A d v i s o r s C api t al ®, I n c i s a Reg ister e d Inve stme nt Ad vis o r (RIA) & is a b on d e d f id u cia ry f or ou r clie n ts & a d v isors. A ll f in a n cia l d a ta is prov id e d b y Folio I ns t i t ut i o nal ®. F i r s t A dvisors C api t al ® , I n c, i s ind ep e nd e nt o f P r o E q uitie s, Inc. Se cur i tie s of f e re d throu gh P roE qu itie s, In c. me mb e r FIN RA & SIP C . In v e stme n ts in se cur i t i es ar e : N OT FD IC IN S U RE D /N O B A N K GUA RA N TE E S/M AY LO SE VA LU E . F i r s t A dv i s o rs C api t al ®, I n c. i s a r e g is ter e d tr ad emar k, all r ig hts r e se r ve d . It is prohib ite d to u se a n y in f orma tion con ta in e d in this f a ct she e t w ithou t e x p r es s w r i t t en c o ns ent .
FAC First Advisors Capital®, Inc. A Registered Investment Advisor
PORTFOLIO FACTS As of 03-31-2017
• Inception Date: 08-08-2015 • Minimum: $250,000 (CAFT)* • Offering Type: Proprietary • Methodology: Long/Short, Options Based • In Kind Assets Accepted: Yes • Type of Accounts: Qualified/Non-qualified PORTFOLIO MAKE UP
1ST QUARTER 2017
FAC Equity Yield Plus (EYP) A Low Market Exposure, High Frequency Compounding Alternative to Equity Income Investing Ove r vi e w First Advisors Capital, Inc. (FAC) Equity Yield Plus (EYP) is a meaningful and much needed solution for those seeking retirement income and also as an alternative for clients who have a lower tolerance for risk, but still wish to protect their future purchasing power. This unique proprietary methodology offers much lower direct market exposure, and more frequent compounding than traditional buy-and hold dividend stock investing. These unique attributes attempt to provide returns that are both, less volatile, but most importantly, void of large direct market drawdowns that can be so detrimental to clients seeking income and/or those with zero time horizons.
Investment Philosophy We believe market volatility can be efficiently addressed through the selling of options (cash secured Puts on high-quality dividend stocks, and Vertical Spreads on SPX). Options applied by professionals, which includes higher compounding frequencies of any realized gains, though not guaranteed, attempt to provide more risk control, and far less direct market exposure. EYP attempts to expose the client to much shorter market cycles (average contract length less than 30 days), and more favorable pricing conditions than are traditionally associated with buy and hold dividend investing.
The Power of Negative Returns
• Individual Stocks (Secured Puts)
One of the primary goals of investors is to generate returns. However, many investors fail to realize the impact that withdrawals and negative performance have on their portfolio. Most investors do not understand the difference between simple and compounding returns. The bottom line is; after incurring a loss or withdrawal, the percentage gain required to break even is significantly higher than the initial loss or withdrawal itself.
• Vertical Spread Options: Index (SPX)
Why Sequence Matters
Capitalization: LCV/MCV Average No. of Holdings: 10–20
• Market Correlation: Agnostic • Beta: .2030
The industry has long taken a logical, linear, largely simplistic, approach in their advice to pre-retirees: systematically draw-down assets to finance retirement. Many people in the financial planning industry naively think that if they use historic averages then everything will be fine in the long run. Unfortunately, this is not the case. There is ALWAYS a permanent loss due to fluctuations in a distribution portfolio. In many cases, this loss can cut the portfolio life by half of what a standard retirement calculator predicts using average growth rate.
• Average Market Exposure: 17.84%
Examples
R I S K M E T R I C S 6 (AT RISK LEVEL 1)
SPX: 1
SPX : 100%
If there are no distributions, and a portfolio loses 10%, you must eventually gain 11.1% to break even. However, if you are taking 6% annual distributions while this net 10% loss is experienced, you must gain +30% over the next 3 years just to break even! Routine losses of just 10% are very real and periodically spread out over one’s retirement, can ruin a retirement plan for good because of these Time Value of Fluctuations. While taking a 6% annual distribution, a market loss of 20% requires 51% gain and a loss of 30% requires a 74% gain EVERY YEAR for 3 straight years!
• Sharpe Ratio: 2.507 SPX: 0.78
• Standard Deviation 4 : 3.71
SPX Standard Deviation: 10.36
Equity Yield Plus (EYP) High Cash Holdings
PLATFORM
• Custodian: • Daily performance analytics available upon request
As they say, Cash is King, and EYP proves this. When you actually implement your precious cash, can be even more important from an overall market prospective, as what you are investing in. EYP’s managers hold the majority of the portfolio in cash pursuant to taking shorter term positions. EYP attempts to maintain the lowest market exposure possible, in pursuit of respective targeted returns.
The Bottom Line for your Retirement Dollars Routine losses over a few years can permanently ruin a retirement plan, because of the Time Value of Fluctuations, and the Power of Negative Returns. As a matter of fact, you don’t need to have any losses at all in your portfolio to run out of money. If a portfolio grows less than the original projection, just for one market cycle (typically four or five years) at the beginning of retirement, the likelihood of ever catching up with the original retirement projection will diminish to near zero.
• Type: Non-transactional/Asset Based • Annual Platform Cost: 20bps *Cash Ava ilable For Trading ®
w w w.m y f a c .com For additional disclosures on advisor fees please review FAC’s or your advisor’s most recent Investment Advisory Fee Schedule. Please review with your advisor your particular risk profile. Fees are deducted annually on a quarterly basis in advance. First Advisors Capital, Inc. is a registered trademark, all rights reserved. It is strictly prohibited to use any information contained in this fact sheet without express written consent.
NOT FDIC INSURED/NO BANK GUARANTEES/MAY LOSE VALUE
You Do Have a Choice FAC’s Equity Yield Plus (EYP) offers a meaningful professionally managed solution for retirees in today's current market environment of high stock valuations, low interest rates, and uncertain global systemic risks. Today’s global environment has forced retirees into risk assets at a higher rate than ever before in history. However, retirees do have a choice as EYP’s risk mandates of high cash holdings, low market exposure, high frequency compounding, serves as a meaningful solution for retirees, when used as a core component of an overall diversified income portfolio. 04182017a
FIRST ADVISORS CAPITAL®, INC. EQUITY YIELD PLUS (EYP)
Three Level of Distinct Market Exposures and Target Returns 5,6,7
EYP is offered within 3 distinct targeted risk/return contract multiples*, as it pertains to market exposure, thus allowing clients to tailor their risk exposure within their specific income needs, all the while enjoying total liquidity and zero direct interest rate risk. This allows clients to be far more specific in their funding and distribution goals without the open-ended market exposure, liquidity and interest rate issues of traditional Equity Income investing. TARGETED MARKET
NET TARGETED ANNUAL
EXPOSURE RANGE6
ROR RANGE1,2,5
1
0–10%
6–9%
2
1.5
0–20%
9–15%
3
2
0–30%
18–21%
RISK LEVEL8, 9
CONTRACT MULTIPLE9
1
*Controlling risk is paramount to this methodology. Vertical spreads are initially scaled in at 1–2% +/– of any one portfolio at Risk Level 1. Higher exposures may occur in certain instances pursuant to any required contract mitigation(s). Available Contract Multiple Risks: LEVEL 1: APPROXIMATELY 2% +/– MAXIMUM EXPOSURE PER VERTICAL SPREAD PAIRING, 2-4% FOR CASH SECURED PUTS ON HIGH QUALITY DIVIDEND STOCKS. ACCOUNT PER CONTRACT PAIRING*. LEVEL 2: 1.5X LEVEL 1. LEVEL 3: 2X LEVEL 1. Increasing contract risk multiples will increase both market exposure, beta, risk, and possibly returns. Please see EYP's Performance Analytics which is available at www.myfac.com on a monthly basis for actual risk and return metrics of this methodology's trading block. Please contact your advisor for additional information on these additional risk offerings.
It is important to understand that FAC’s strategy will participate to a lesser degree with overall market movements, both up & down. Though none of these strategies are guaranteed, they are intended to be less market correlated & more likely to produce consistent low volatility returns that are actually realized at the end of each contract period, which averages less than 30 days. EYP's goal is to meet our target returns with as little market exposure as possible. EYP should be considered as a core holding, pursuant to income and time horizon needs.
3-31-2017
HISTORICAL RETURNS & AVG. MARKET EXPOSURE PER CONTRACT RISK LEVEL1,2,5 All returns include maximum platform and advisor fees Period Returns %
Risk Level 1
Risk Level 2
Risk Level 3
S&P 500 Index w/o fees
1 Mo.
1.10
1.65
2.20
0.13
3 Mo.
1.14
1.71
2.28
5.92
6 Mo.
1.88
2.82
3.76
10.11
9 Mo.
4.09
6.14
8.18
14.27
YTD
1.14
1.71
2.78
5.92
1 Yr. Rolling
7.86
11.79
15.72
17.07
2 Yr.
N/A
N/A
N/A
N/A
3 Yr..
N/A
N/A
N/A
N/A
Since Inception 08-18-2015
8.08
12.12
16.16
16.47
Avg. Market
17.84
26.76
35.68
100
Exposure3 %
1. FAC rates of return for Equity Yield Plus (EYP) are derived directly from an actual client account statements provided by TD Ameritrade within the Trading Block of EYP. Historical returns utilize Holding Period Return calculations. All returns include the reinvestment of dividends and other realized gains or losses including the collection of net debit or credit options premiums. Partial year returns are cumulative, not annualized. 1 year annual returns are based on 12 month rolling periods. Multiple year returns are based on average calendar year returns. These returns include the deduction and compounding of MAXIMUM platform, management, and ADVISOR fees. Lower fees may be available, depending on, but not limited to: account balance size, sub- advisory and client advisory agreements. PLEASE REVIEW YOUR ADVISOR’S CLIENT FEE SCHEDULE FOR YOUR ACTUAL COSTS, WHICH MAY BE THE SAME OR LESS THAN THOSE INCLUDED IN THESE POSTED HISTORICAL RETURNS.
2. Every attempt by management is made to remain consistent with EYP’s methodologies especially when addressing risk mandates, however, future market conditions, objectives may change materially in the future compared to the past time periods, this may affect future results of your investment account versus these posted past results. Other conditions that may affect returns include, but are not limited to: start dates, account balance, Sub-advisory / client advisory agreements, withdrawal/deposit frequencies, non-managed holdings, cash maintenance requirements, block trade synchronization, options contract mitigation, and taxes. 3. Average Market Exposure is based most recent rolling 12-month period. FAC provides, the results to the S&P 500 Index total Holding Period Returns over the same time periods without the deduction of Fees and the market exposure is 100%. The S&P 500 Index is the sole property of Dow Jones/McGraw Hill. 4. Even though every attempt by management is made to keep EYP’s methodology consistent, past returns may contain securities or strategies that management may no longer utilizes due to present market conditions that may affect your future returns and market risk / volatility, verses these posted results. These attributers may include but are not limited to: Contract mitigation, 100 round lot option exposure respective of individual account balance, client selected risk exposure, advisory fee agreements, account deposit synchronization within the managed block, deposits / withdrawal frequency, and taxes. 5. OPTIONS STRATGIES ARE NOT GUARARNTEED, INVOLVE MARKET RISK, INCLUDING PERMENENT LOSS OF PRINCIPLE There may be additional risks involved in the use of options for hedging and other strategies. It is vital that investors understand these methodologies fully before engaging in options trading. Prior to participating in this offering, investors must receive a copy of Characteristics and Risks of Standardized Options. Copies of this and other required disclosures are available through your FAC representative. 6. RISK METRICS: All statistical metrics for EYP are calculated by FAC, and are based on Since Inception Date 08-18-2015. Market Correlation: the degree to which two securities move in relation to each other. Beta: The tendency of a security’s returns to respond to swings in the market vs a comparable Index or other chosen benchmark. Market Exposure: The dollar amount or respective percentage of overall portfolio invested in a marketable security, option contract, market sector or industry. Sharpe Ratio: is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Standard Deviation is a measure of the dispersion of a set of data from its mean; more spread-apart data has a higher deviation, and is calculated as the square root of variance and is applied to the annual rate of return of an investment to measure the investment’s volatility. SPX Risk Metrics based on 3 Yr. Avg., provided by MorningStar®. 7. Risk mandates are paramount to this methodology but are NOT GUARANTEED. EYP, will hold high average CASH account balances and is intended to provide targeted returns utilizing the lowest possible market exposure. Though results are not guaranteed, by mandate, returns will NOT be directly correlated to the overall market including EYP’s comparable index. 8. Vertical (Call and or Put) Spreads as well as Cash Secured Puts on high quality dividend stocks, may be utilized together or separately, however individually, they are initially scaled in at 1-3 % +/– of any one portfolio with an overall portfolio exposure of 10%* +/-at Risk Level 1*. Higher exposures may occur in certain instances pursuant to any required contract mitigation(s)*which may increase the portfolios overall exposure depending on the effect of the material market or economic conditions which could result in management closing out contracts at a loss verses accepting continued risk exposure. 9. THREE Available Contract Risk Multiples: LEVEL 1*: APPROXIMATELY 4% +/– MAXIMUM EXPOSURE PER ACCOUNT PER OPTION CONTRACT PAIRING OR CASH SECURED PUT. LEVEL 2: 1.5X level 1. LEVEL 3: 2X level 1. Increasing contract risk multiples will increase market exposure, and thus beta, risk to principle, market risk / losses and possible returns. This information is believed to be accurate, but has not been independently verified. Past performance is no guarantee of future results. Investing involves risk including the permanent loss of principle. There is no guarantee that these methodologies and offerings that FAC manages will perform better than any other comparable methodology, offering or index. Please review your Investment Advisory Services Agreement, ADV 2a /2b, Fee Schedules and Custodial Disclosures including Characteristics and Risks of Standardized Options before investing. F irs t Advisors Ca pita l®, In c. • 4 95 6 Valle y d ale Ro ad S u i t e • 2 0 3 B i r m i n g h a m , A l a ba m a 3 52 4 2 • 1 - 86 6 - 3 53- 84 84 • su ppor t @my fac.com F ir s t A d v i s o r s C api t al ®, I n c i s a Reg ister e d Inve stme nt Ad vis o r (RIA) & is a b on d e d f id u cia ry f or ou r clie n ts & a d v isors. A ll f in a n cia l d a ta is prov id e d b y Folio I ns t i t ut i o nal ®. F i r s t A dvisors C api t al ® , I n c, i s ind ep e nd e nt o f P r o E q uitie s, Inc. Se cur i tie s of f e re d throu gh P roE qu itie s, In c. me mb e r FIN RA & SIP C . In v e stme n ts in se cur i t i es ar e : N OT FD IC IN S U RE D /N O B A N K GUA RA N TE E S/M AY LO SE VA LU E . F i r s t A dv i s o rs C api t al ®, I n c. i s a r e g is ter e d tr ad emar k, all r ig hts r e se r ve d . It is prohib ite d to u se a n y in f orma tion con ta in e d in this f a ct she e t w ithou t e x p r es s w r i t t en c o ns ent .
