Solutions
Aggressive Yield Seeker Solution
Writing Put-Option Premium on Our Opportunistic Stock Portfolio Candidates
Selectively target high yields using a systematic research process
The Concept
When negative investor sentiment dominates price action and becomes irrational, fundamental valuations often become overlooked, resulting in attractive investment opportunities to buy good companies at cheap prices. However, rather than buying these companies, we sell put option premium on them to generate attractive yields and a worst case scenario of owning the stocks at a price which is 20% lower than are willing to pay for them today.
By selling put option premium on a stock, you are collecting a premium upfront, in exchange for agreeing to buy the stock at some agreed upon strike price, usually lower than the current price, in the future, typically 6-12 months in our case. If the stock does not go below the agreed price within the term agreed, you get to keep the premium and the trade is over. If the stock price goes below the agreed strike price, then you are required to buy the stock from the person who bought the insurance from you. For this reason, you only want to sell insurance on stocks that you are willing to own and hold for the long term.
When negative investor sentiment dominates price action and becomes irrational, fundamental valuations often become overlooked, resulting in attractive investment opportunities to buy good companies at cheap prices. However, rather than buying these companies, we sell put option premium on them to generate attractive yields and a worst case scenario of owning the stocks at a price which is 20% lower than are willing to pay for them today.
By selling put option premium on a stock, you are collecting a premium upfront, in exchange for agreeing to buy the stock at some agreed upon strike price, usually lower than the current price, in the future, typically 6-12 months in our case. If the stock does not go below the agreed price within the term agreed, you get to keep the premium and the trade is over. If the stock price goes below the agreed strike price, then you are required to buy the stock from the person who bought the insurance from you. For this reason, you only want to sell insurance on stocks that you are willing to own and hold for the long term.
What We Do
As part of our Opportunistic Stock picking solution, we identify fallen angel companies trading at sentiment extremes that do not reflect their underlying fundamental value. We then perform the fundamental research to pre-qualify those companies we wish to own and at what price. If those companies reach a price which is acceptable, they become eligible for the put option solution.
We have created a set of rules under which it makes sense to allocate capital into the put-write solution. The rules specify the type of companies we can utilize for this solution, the excess return premium we require over current high yield bonds, and the discount we require if we end up owning the stock.
We monitor the market on a daily basis to determine whether any opportunities exist that meet our criteria.
We implement and manage the entire trade process in your own separately managed account - we do not take custody of your funds.
As part of our Opportunistic Stock picking solution, we identify fallen angel companies trading at sentiment extremes that do not reflect their underlying fundamental value. We then perform the fundamental research to pre-qualify those companies we wish to own and at what price. If those companies reach a price which is acceptable, they become eligible for the put option solution.
We have created a set of rules under which it makes sense to allocate capital into the put-write solution. The rules specify the type of companies we can utilize for this solution, the excess return premium we require over current high yield bonds, and the discount we require if we end up owning the stock.
We monitor the market on a daily basis to determine whether any opportunities exist that meet our criteria.
We implement and manage the entire trade process in your own separately managed account - we do not take custody of your funds.
What You Get
If opportunities present themselves, then you end up with either 1) an annualized return in the high teens on the capital allocated, or 2) if the trade goes against us, then you end up owning the stock at a discount from the price at which we are willing to purchase the stock today, of approximately 20%. If no opportunities present themselves, your funds are held in cash or short term government bonds.
Diversification from a focused contrarian strategy.
A turn-key, fully transparent solution in your own account.
The opportunity to participate in our future research ideas.
If opportunities present themselves, then you end up with either 1) an annualized return in the high teens on the capital allocated, or 2) if the trade goes against us, then you end up owning the stock at a discount from the price at which we are willing to purchase the stock today, of approximately 20%. If no opportunities present themselves, your funds are held in cash or short term government bonds.
Diversification from a focused contrarian strategy.
A turn-key, fully transparent solution in your own account.
The opportunity to participate in our future research ideas.
How Your Money Is Invested - Managed Account
Put options will be sold opportunistically, from time-to-time, on pre-qualified stocks that have passed our research process and where the return and risk from selling put option premium exceeds our hurdle rate.
Clients will not be notified of trade ideas in advance, but once the trades are implemented will be able monitor it at all times in your account with Interactive Brokers. Once you are on board as a client, we will let you know when we have new opportunities to put additional capital to work; if you wish to participate, you can then transfer additional funds into your account - beyond the first $25,000 we do not request that you commit funds unless we have opportunities ready to go.
Put options will be sold opportunistically, from time-to-time, on pre-qualified stocks that have passed our research process and where the return and risk from selling put option premium exceeds our hurdle rate.
Clients will not be notified of trade ideas in advance, but once the trades are implemented will be able monitor it at all times in your account with Interactive Brokers. Once you are on board as a client, we will let you know when we have new opportunities to put additional capital to work; if you wish to participate, you can then transfer additional funds into your account - beyond the first $25,000 we do not request that you commit funds unless we have opportunities ready to go.
How Can I Invest?
We are a Registered Investment Advisor and Money Manager and offer our services to clients via separately managed accounts opened with our custodian Interactive Brokers. Trades are implemented for clients in their own separately managed account with Interactive Brokers - we do not take custody of client assets. The minimum investment for this solution is $25,000. We charge a 1% asset management fee plus a performance fee of 7.5% of the net profits (net profit is calculated after deducting all other fees - in addition to the 1% fee, there may also be an account fee of $10 per month paid to the custodian).
Clients will not be notified of trade ideas in advance, but once the trade is executed will be able monitor it at all times in your account with Interactive Brokers. Trade horizon will typically be 6-12 months so it is prudent to expect that the money will be tied up for one year.
Once you are on board as a client, we will let you know when we have new opportunities to put additional capital to work; if you wish to participate, you can then transfer additional funds into your account - beyond the first $25,000 we do not request that you commit funds unless we have opportunities ready to go.
Given that we charge a performance fee, this solution can only be made available to "qualified clients" under the Advisors Act. If you are interested in participating please leave your details via the link below to the contact form on our Home page and we will be in touch.
We are a Registered Investment Advisor and Money Manager and offer our services to clients via separately managed accounts opened with our custodian Interactive Brokers. Trades are implemented for clients in their own separately managed account with Interactive Brokers - we do not take custody of client assets. The minimum investment for this solution is $25,000. We charge a 1% asset management fee plus a performance fee of 7.5% of the net profits (net profit is calculated after deducting all other fees - in addition to the 1% fee, there may also be an account fee of $10 per month paid to the custodian).
Clients will not be notified of trade ideas in advance, but once the trade is executed will be able monitor it at all times in your account with Interactive Brokers. Trade horizon will typically be 6-12 months so it is prudent to expect that the money will be tied up for one year.
Once you are on board as a client, we will let you know when we have new opportunities to put additional capital to work; if you wish to participate, you can then transfer additional funds into your account - beyond the first $25,000 we do not request that you commit funds unless we have opportunities ready to go.
Given that we charge a performance fee, this solution can only be made available to "qualified clients" under the Advisors Act. If you are interested in participating please leave your details via the link below to the contact form on our Home page and we will be in touch.