Actively Managed: Investment Objective

ACTIVELY MANAGED: INVESTMENT OBJECTIVE:

Our overall investment objective is capital appreciation.  With no short-term cash needs we focus on stocks with high liquidity including volume and volatility.   We will diversify our account through stock purchasing and options trading. Our stocks were selected with short term value in mind.  We selected stocks with high implied volatility to capitalize on the goal.  

ACTIVELY MANAGED: INVESTMENT/TRADING STRATEGIES:

Our investment strategy to buy our initial stocks was to have a diversified portfolio across industries and securities. With no short-term cash needs we focus on stocks with high liquidity including volume and volatility, as we are looking for appreciation. Our options strategy is to follow companies approaching earnings reports. Since volatility temporarily increases as earnings reports approach, it allows for greater change in stock price on the short term horizons. Combining these underlying with quality research on the likely direction of the stock price maximizes our chances for profit on the trade. Our research will determine what options’ strategy we will take.  We invested 75% of our cash into equities and saved the 25% of cash as margin.  This allowed us to execute our strategy which is to short options as opposed to buying long position. We chose to open the options trade with a sell because we receive a credit and time decay is on our side. We will make a profit when the stock prices moves in the assumed direction and if it remains constant as the price of a long position options decreases as the options gets closer to expiration.  Another advantage of this strategy is if the stock price moves out of the money, the worst case scenario is that we purchase the stock at a discount and can be reused to cover a call.  We will only open short positions on stocks we would not mind owning to help execute this strategy.  

ACTIVELY MANAGED: RISK MANAGEMENT PLAN

As part of our risk management plan we wanted to diversify our portfolio by industry and type of security while still keeping capital appreciation as the goal. We devoted an initial  portion of 75% of our portfolio to equities.  We looked closely at each equity and picked each one for varying reasons including earnings announcements, dividend payouts, news and research and others. We closely monitored each stock by tracking daily news and performance and adjusting the portfolio where needed. We took more of a technical analysis approach in our selection of these equities. We assessed risk at each stage including investment selection, portfolio construction and ongoing evaluation.

Our main strategy to minimize risk in our portfolio is to diversify. We believe the best hedge against market fluctuations is to diversify. Our asset allocation plan is to buy about 75%

ACTIVELY MANAGED: PORTFOLIO REBALANCING PLAN

Our rebalancing plan will consist of recording our total cost of each stock at the time and the total cost of our portfolio. This will provide us with historical data for our portfolio to compare them to current values. On our (chosen future date..every 2 weeks??) we will evaluate each asset class by the total portfolio value and determine which asset class we need to invest in depending on capital appreciation. Our goal is to have 75% in equities, 20% options, and 5% in bonds.