Estate of Leon Israel, Jr., Deceased, Barry W. Gray, Executor, and Audrey H. Israel - Page 8

                                                  8                                                   
            securities to which the contracts are pegged that occur during                            
            the period of time that the contracts remain outstanding.  Those                          
            factors will determine the entire net gain or loss whenever the                           
            position is settled or closed out.                                                        
                  No actual purchase or sale of the Government securities to                          
            which the forward contracts are pegged is ever contemplated.  In                          
            fact, no specific Government securities are identified as being                           
            associated with the forward contracts.  In actuality, the                                 
            Government securities to which the forward contracts are                                  
            associated are more accurately described as hypothetical                                  
            Government securities that, if they existed, would have the same                          
            interest rates and other features as the type of Government                               
            securities to which the forward contracts are pegged.                                     
                  Pricing of the forward contracts entered into by Holly                              
            occurred in the following manner.  Mr. Wolff, on behalf of Holly,                         
            negotiated with ACLI Government Securities, Inc. (AGS), a dealer                          
            in Government securities and a broker of commodity futures                                
            contracts, the price differential -- as of the date the contracts                         
            were entered into -- between the long and short positions of each                         
            straddle and, once that differential was agreed upon, left it to                          
            AGS to assign prices to the two legs of the straddle reflecting                           
            the initial price differential agreed upon.  When Mr. Wolff                               
            negotiated with AGS regarding offsetting positions, again he                              
            would negotiate with AGS only the price differential as of the                            
            date the offsetting contracts were entered into.                                          




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011