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MONEY MANAGEMENT
by Lawrence G. McMillan

Profits in a Hedged Strategy
The primary focus of our trading strategy is to trade options based on theoretical worth. However, rather than taking positions that depend solely on our ability to correctly predict market price movements (for example, buying call options and expecting the market to move up), we take positions that can make money if the market makes a move in either direction.

In this manner, we have a hedged strategy: the loss on one option can be offset – perhaps even overcome – by the gain on the other option. Profits are generated when the gain on one side, which is theoretically unlimited, exceeds the loss from the other side of the strategy.

"... we take positions that can make money if the market makes a move in either direction"

This is not to say that a hedged strategy is without risk. It is possible that both sides of the hedge might lose money. Yet, the nice thing about a hedged approach is that profits can be made in either bull or bear markets. If hedged positions are selected carefully and monitored diligently, then a reasonable rate of return may be obtained in any type of market.

A Reasoned Approach

We view our responsibility in handling your money as a serious commitment. Our approach is a reasoned one, in which we attempt to make steady returns in either bull or bear markets. It is not a highly speculative approach, despite the use of options, because of its market neutral approach.

We realize this strategy is not for everyone. Furthermore, we most certainly live by the philosophy that one should only invest in strategies that are compatible with his or her personal philosophy of trading.

Thus, our clients share our philosophy of a generally market neutral approach, striving to create profits while remaining hedged.

Past Performance Is Not A Guarantee Of Future Results.

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