Investment opportunities – TRADING METHODOLOGY

Many funds rely on Buy & Hold or dividend driven strategies. Trillium uses a variety of strategies for investment opportunities including:

  • Swing Trading – This involves buying a stock or exchange-traded fund (ETF) to capture gains over a period of one night to several weeks. Swing traders look for stocks with short-term price momentum.
  • Options Trading – an option represents a contract sold by one party to another. The contract offers the buyer the right (but not the obligation) to buy (call) or sell (put) a security or other financial asset at an agreed-upon price during a certain period of time or on a specific date. We trade Put and Call options in different ways:
  • Spreads – Spread trades involve the purchase of one option and sale of another related option as a unit. They are executed to produce an overall net trade with a positive value. They are priced as a unit to ensure the simultaneous buying and selling of a security to eliminate any execution risk.
  • Dividend Trades – This uses the stock and its corresponding option to take advantage of stocks over their ex-dividend date.
  • Earnings Trades – This takes advantage of large price moves up or down that can occur after an earnings announcement.
  • Hedge Trades – We use options to hedge the portfolio during times of uncertainty – the US Presidential election for example.

Investment opportunities – A CASE STUDY

Below is an example of an options trade we entered on Disney (DIS)

We first entered the postion on the 5th of June, the drop at the end of June was due to the market’s reaction to the Brexit vote – market sentiment. We managed the trade and the final result was $3.47 net profit or a 4% return on capital invested over 8 weeks. If we had bought the stock instead of the option, at $97, there are several outcomes – Worst-case sell at the low, $94 = losss of 3%. Best-case, sell at the high, $100 = profit of 3%. The stock was trading at the same price 8 weeks later = break-even. The option trade gives greater flexibility, ties up less capital and makes a greater return.