Investment Management
For many, a disciplined investment strategy and a proactive risk management strategy are one in the same. A risk management philosophy focusing on disciplined hedging, selecting the right securities, and regularly monitoring a portfolio may reduce the risk of potential stock price declines.
Disciplined Hedging
Hedging may reduce potential volatility created by unknown and uncontrollable forces.
Macroeconomic factors—economic data, stock market momentum, market sentiment, geopolitical issues, political machinations, and more—are part of a disciplined hedging process and can help to identify how and when hedging is appropriate. Hedging techniques based on fundamental and technical analysis of each security may include purchasing puts, creating collars, or a variety of spreads on a combination of securities, which may help mitigate market volatility.
Selectivity
Buying the right securities is a primary risk management tool.
Selecting individual businesses of profitable companies with strong fundamentals and high-quality management is among the most important considerations in managing risk and producing appropriate premium with minimal price fluctuation. Trading decisions based on personal experience and education rather than by algorithm is also primary for many.
A risk management philosophy focusing on disciplined hedging, selecting the right securities, and regularly monitoring a portfolio may reduce the risk of potential stock price declines.
Monitoring
Actively monitoring each equity and option position may help reduce portfolio risk.
Performing a market postmortem at the end of an option cycle—what got called away, what didn’t, and preparing for what might happen in the next cycle—are strong considerations in managing risk and understanding what might happen in the future. Proactive strategies may focus on evaluating potential risks and their impact on financially strong, profitable mid- and large-cap US businesses and integrating options such as spreads, straddles, and buying puts.
Monthly Income
The cornerstone of Solidarity’s management philosophy is to produce steady monthly income. The idea is to focus more on steady returns as opposed to chasing one-time large wins. In baseball terms, investment management focuses on hitting more singles and doubles than home runs. Monthly income can come from three sources: income from options; dividends from stocks; and potential capital gains.