Risk Management

Maximizing Returns in any Market Condition

April 05, 2018 – Present

– controlling the peaks and valleys

We are conscious of the importance of risk management. We believe that superior long term returns are the result of losing less in adverse markets than maximizing gains in rising markets. Should our investment thesis on a trade prove to be no longer valid, we will close the trade for a loss. Should a trade move against us while the investment thesis remains valid, we will consider adding to the position to lower the breakeven point if the time remaining to expiration offers a reasonable chance of recovery. For this reason, we may undersize the original position in order to provide room for adding at more advantageous prices.

If the open position consists of options, we may close or hedge the position before expiration to lock in a gain or avoid a further loss, or we may roll out the position to a later date at the same or a different strike price. These rolls will either reduce the investment in the original position or modify the strike price to reflect the price trend of the underlying security. In all cases, when selling options, we target at least a 60% chance of expiring worthless, and typically much higher.   

The Result

Through the methods described above, our Growth portfolio was able to weather 3 out of the 4 sector rotations that left technology and energy down as much as 40% from their recent highs in 2018.

Sector Shifts Have Left Most Strategies In Ruins. Not Ours.

Hedging Products

iPath S&P 500 VIX ST Futures – VXX

We are able to capture high volatility swings to offset portfolio declines through Buying/Selling specially structured option spreads. Learn More

Consumer Staples Sel. Sect. – XLP

By implementing Fund Specific BumbleBee Spreads, we are able to create large windows of profit with returns in excess of 200%. Learn More

High Beta Securities  –  2.0+

Going into a period of high volatility, we assess high Beta securities to identify probable outcomes and short/buy puts accordingly. Learn More


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