Methodology


Business man in suit with graph and charts exploding from his bo

The success of our investment strategy can be boiled down to two key factors:

1. Maximizing Probabilities

2. Managing Risk

Maximizing Probabilities

By analyzing historical patterns and implementing our proprietary models, we are able to employ strategies that will give the best odds of success in the portfolios.  For example, if the markets have been in a low-volatility situation for a long time, history has shown us that there is always some event that causes volatility to spike
higher.  It may come from man-made developments such as elections, political unrest, government market interventions, and the like or it may come from natural catastrophes such as a drought, hurricanes, or an extreme cold snap.  Regardless of the source, there will be periods of volatility, but more importantly, our analysis and experience give us the knowledge that eventually the volatility will pass.  This high-confidence projection allows us to tilt the odds of success in our favor by carefully monitoring the markets and structuring appropriate investments including equities, options, ETFs and futures to take advantage of our forecasts.  Whether it be a volatility strategy, an index forecast or an equity trade, the same analysis is employed to optimize the probability of success. To see an example: Maximizing Probabilities & Managing Risk

 

Managing Risk

Even if an investment has a 99% probability of success, that 1% chance of failure still exists, and that would be catastrophic if the entire account were invested and the 1% event happened.  To manage such a risk, we allocate funds into our different strategies based on the best current projection for success and then further divide the strategies into multiple time frames.  As an example, option spreads could be held on an index with weekly, monthly and yearly expirations all at the same time. If one of the positions doesn’t work out as planned, the others serve as a buffer to maximize the returns while reducing exposure over the investment holding period.

To put it another way, by maximizing probability we seek to make the most money in a situation while managing risk strives to avoid losing the most money in that situation.  We constantly monitor the markets and adjust our analysis to the current situation to make sure we have the appropriate balance between profitability and exposure in the portfolios.  And, you can be confident that we are thoroughly invested in the success of the portfolios since we started them with our own investment capital and we are still fully invested today.