Estate of Leon Israel, Jr., Deceased, Barry W. Gray, Executor, and Audrey H. Israel - Page 10

                 Occasionally, an investor may wish to terminate or "lock in"                         
           the gain or loss on only a particular leg of a commodity forward                           
           contract or straddle.  The procedure is essentially the same, and                          
           the transaction is essentially the same, regardless of which of a                          
           number of available methods is utilized to lock in the gain or                             
           loss on a particular leg of a commodity straddle transaction that                          
           has occurred up until that point in time.                                                  
                 True cancellations of forward contracts, where the                                   
           transaction or contracts are vitiated ab initio, only occur when                           
           forward contracts contain errors.                                                          
                 When interest rates change at any time during the period of                          
           time that forward contracts are open, the value of the straddle                            
           increases or decreases, but that increase or decrease is                                   
           moderated by the fact that as one leg of the straddle increases                            
           in value, the other leg decreases in value by a similar amount.                            
           Although the change in value of a given straddle remains fairly                            
           constant, one particular leg of a straddle may reflect a large                             
           loss and the other leg may reflect a large gain when interest                              
           rates fluctuate widely and when the other leg of the straddle is                           
           not considered.  It was at such a point in time that Holly, for                            
           income tax purposes, occasionally would close by offset or by                              
           "cancellation" only a loss leg of a straddle and simultaneously                            
           replace the loss leg with a new contract for a slightly different                          
           delivery date, thereby locking in the loss on the first leg and                            
           the gain on the second leg of the straddle that had occurred from                          

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Last modified: May 25, 2011