WHERE IT FITS

CONCENTRATED STOCK POSITIONS
For a portfolio concentrated in a single stock position, the primary decision is whether to hold or diversify. Financial theory suggests that diversifying concentrated equity holdings is appropriate for most investors. There are a variety of diversification solutions available, including immediate liquidation, staged sales, hedging transactions, exchange funds and planned giving. While investors often utilize multiple strategies to manage a concentrated holding, many continue to retain a substantial portion of their portfolio in a single holding.

The most common reasons for holding a concentrated position include:

• Deferring or avoiding capital gains taxes
• Bullish performance expectations for the stock
• Limitations or restrictions on stock sales

ENHANCING TOTAL RETURN AND CREATING INCOME
For investors who choose to hold a concentrated stock position, Parametric offers a managed covered call program that seeks to improve total return and to generate incremental income. We call this program DeltaShift^SM. "Delta" reflects the probable change in the value of an option relative to changes in the value of the underlying stock; "shift" refers to the way options reshape the expected risk and return characteristics of an investment or portfolio of investments. DeltaShift is a transparent, repeatable methodology with institutional execution and efficient operational processes designed to boost total return within clearly defined risk parameters.

Parametric Risk Advisors actively manages the DeltaShift covered call writing program for high-net-worth investors and institutions with concentrated holdings. With its significant risk management experience and superior technology, Parametric seeks to enhance the total return of a concentrated position in the most efficient manner.

WHAT IS A COVERED CALL?
A covered call is a combination of owning shares of a stock and selling (or writing) call options against those shares. The seller of a call option receives an upfront cash premium while the buyer of a call option receives the right, but not the obligation, to purchase a fixed number of shares of the underlying stock at or before a future date (the "maturity date") at a predetermined price (the "strike price").

• If the stock price is below the option's strike price on the option's maturity date, the option generally expires worthless, and the seller keeps both the premium and the stock.
• If the stock is above the strike price on the option's maturity date, the option will be exercised, and the call option writer is obligated to sell the fixed number of shares of stock at the strike price. While the sale of a covered call generates positive cash flow, it does not eliminate the downside risk of stock ownership. The maximum loss for a stock position with a written covered call is the total loss of the stock less the option premium received. At the same time, the strategy may limit some of the potential upside return. Parametric's approach, to roll the options and reset the strike price frequently, may allow clients to continue to participate in stock appreciation over time.