Cash Flow Investments

8/11/2019 Cash Flow Investments

1/17

Absolute Returns in an

Uncommon Market

10-CINV-00063


2/17

2

The proram consists o! "ritin short #sellin$ call an% put option positions "ith the oal o!

pro!itin !rom time %eca&' The approach( in an% o! itsel!( is similar to the one use% b&insurance companies across the lobe' )ust like an insurance compan&( &ou "ill ha*e to pa&

out !rom time to time' Remember(ho"e*er( that insurance companies pro!it b& collectin

man& premiums( but onl& pa&in out on a !e"'

Option Selling Strategy

+hort term %ate% contracts "ith e,piration bet"een 2 to 60 %a&s Taretin 1 to 2 positi*e premium collection per month

Utiliin 20 to 0 o! total account marin re4uirements Use o! 5i*ersi!ication #more than 10 markets$ Mone& Manaement

I sell options onl& in +tocks an% T7 that I "ant to e*entuall& o"n'

Program Overview


3/17

+

Selling an Option Contractis Like Selling Insurance

Insurance companies collect small,certain amounts of money (premiums)from policyholders who want to avoid

the possibility of a large, uncertainfinancial loss

If a customer pays $250 when buyinginsurance, but does not have anaccident, the insurance company

keeps the $250 and there are nopayouts !"tatistically#, the insurancecompanies have probability on theirside

"elling options is similar to sellinginsurance


4/17

It has often been said that selling options is similar to operating an insurance company. Buyers of car

insurance pay insurance premiums to an insurance company to insure their vehicles. They pay these

premiums month after month. In most cases, the driver never has an accident, and the insurance

company keeps the premiums as profit. If a driver does happen to have an accident, the insurance

company must pay up.

An insurance company tries to weed out drivers that it deems to be prone to accidents. Some of these

may get insured at higher premiums to account for the higher risk the insurance company is taking on

them!, and some may not get insured at all.

Our "ob as an option seller is to go through this e#act same process. $ust as most drivers do not have

accidents, most of your options will never go in the money. %owever, as in insurance, a few bad

accidents can be bad for the bottom line. An insurance company, therefore, tries to reduce the chances

that one of its drivers will have an accident by checking a number of factors such as driving record, age

of the driver, type of car, etc. As an option seller, you will go through this e#act same process e#cept

instead of drivers, you will be studying a market&s 'driving record,( historical tendencies, current and

future fundamentals, etc. )hile an insurance company can in no way guarantee that the drivers it

selects will not have accidents, it certainly can help its business by selecting only drivers who have

what it considers a low chance of being in an accident. Thus it can lower its risk and increase its

profitability.


5/17

,

Option Time Decay

Time 5eca& o! an option beins to accelerate in thelast 30 %a&s be!ore e,pir&

120Days

90Days

60Days

30Days

0Days

Time Decay fromDay 120 to Day 90 (Least Impact)

Time Decay fromDay 90 to Day 60 (Slightly Greater)

Time Decay fromDay 60 to Day 30

(Greater Still)

Time Decay from U!er

30 Days "rior to #$piry

(%ost &api!)

'ptio

ale

Time &emaiig Util #$piratio Date


6/17


7/17-

Portfolio Strategies

Contd nly trade in li*uid markets +arget total invested capital re*uirements to no more than

20 of total account balances &ctive risk management practices in place such that no

investment incurs a big drawdown

Strategy is targeted to hit consistentsingles every month and never swingfor the home run!

Taret !or consistent monthl&positi*e returns o! 1 to 29

Capitaliin "ith market *olatilit&


8/17

This trading strategy that does not attempt to forecast 100% the market direction, even if we are wrong

in the direction, since we sell Deep-out-of the-Money options, the market need to make a major move

against our position in order for us to lose on the trade, and in this case we have to ways to protect our self,

uying the stock, or roll the contract!

"nformation used to influence the investing decisions includes#

$ "nterest rate and annual volatility

$ roaility of an option eing at a specific price &touching', eing aove or elow it!

$ The historical pricing patterns of the pair

$ rice movement

$ Money management

:ort!olio +trateies Cont;%


9/171.

!at is "#solute $eturn

Investing%

-otential to make money in all market environments

-otential to make money regardless of market direction

-otential to make money while managing risk

-otential opportunity to have positive returns inthe e*uitymarkets or underlying commodity markets via ETFs.


10/1711

Investment Strategies &sed

"elling uncovered puts for the opportunity to buyundervalue stocks

.ook for vervalue -remium to sell

"elling /overed and uncovered calls


11/1712

Investment Strategies &sed

Investing cycle

"ell put options to gain capital

arn enough capital to pay for the stock ('oll ut)

1uy the stock and then sell covered calls against the stock

1e eercised out of the stock

'epeat the investing cycle


12/1713

Option Selling Strategy

ecute the sale of short term date, far out of themoney in +3 or "tocks

piration is between 25 to 60 days

+arget a win rate of 60 on all contracts written

+arget a 4 to 2 net monthly premium

$1207 8inimum investment


13/171+

Summary of Terms

Management fee 2%, Incentive 3ee 20

"hort 60:;ay .ockup +erm


14/17

1/

!at *akes Our Strategy &ni+ue

8ulti market approach to option selling

ecute only in li*uid e*uity and +3 markets

"tatistical advantage that most contracts will be profitable(over 60)

&dvantageous in that the underlying price can moveagainst us and the contract can still be profitable

;iversification within financial instruments to minimi%e risk


15/17

1,

$isk *anagementSolid practices wit! clients needs in mind -ro:active monitoring and management of investments in

relation to risk, return, capital re*uirements, and marketdirections and policies in place to ad


16/17

17

$elia#ility ,

$esponsiveness

$especting our clients #usiness

=ighly seasoned, eperienced, competent and professional staff proactively managing the dayto day investments

+imely, accurate, and thorough reporting to investors

>e have our own money invested in the same managed trading program as our clients, provingwe believe in it and risk our money alongside yours

>e are an alternative investment management firm seeking to make money for our clientsregardless of what the stock, bond, and real estate markets are doing

>e will not be able to access your funds >e only have the ability to trade within your account

ur 1roker is 8ember of 3I?'&, "I-/, &8@, ?8, /1, I", &rca@, 1@, -=.@, and?3&


17/17

8RAT =U>T+

'I don&t look to "ump over *+foot bars I look around for -+foot bars that I can step over.(

-

Documents

Cash Flow Investments