Stock Put Writing Program &
Stock Put Credit Spread Option Program
Vision Advisors provides its clients with an alternative trading strategy that is designed for those investors seeking aggressive returns and who are suitable for a high degree of risk of loss, active and short-term option trading, including the use of leverage in holding short put option positions and short put option credit spread positions. For these investors, Vision Advisors offers the Stock Put Writing Program (“SPWP”) and the Stock Put Credit Spread Option Program (“SPCSOP”).
Vision Advisors seeks to achieve an aggressive return for investors in the Stock Put Writing Program by employing a strategy of writing (selling) put options on a group of common stocks. In the Stock Put Writing Program, if a client desires to own shares of stock, but also believes that the ownership of that stock should take place at a price that is lower than the current market price and is willing to wait until a future date, an option strategy can be employed. The Stock Put Writing Program is a leveraged investment and should only be considered by investors with a high risk tolerance.
The Stock Put Credit Spread Option Program employs a strategy of writing (selling) put credit spread options on a group of common stocks. In this spread transaction both the profit and loss are limited. The spread is the difference between the higher and the lower strike price. This strategy is used when one anticipates that the price of the underlying stock is likely to move higher or remain in a sideways trading range, but remaining above the strikes prices of the spread transactions, which will give it the opportunity to decay over time and result in a profitable trade.
Vision Advisors will first identify companies that we believe have a strong tendency to trade at or above their current market price (these may be the same stocks that Vision Advisors uses in its other portfolios). The portfolios seek to achieve trading profits by ultimately entering into the short-put options trades at higher prices than when the positions are liquidated (closed) or the option positions expire worthless. Of course, an investor should fully understand that a drop (especially a sudden large drop) in the respective stock price will cause losses on the stock option position and, at times, those losses could be greater than the total potential profit on the option transaction. Vision Advisors seeks to maintain a diversified portfolio of short options on various stocks which it believes will be more beneficial than limiting the option positions to just one or a few stocks.
Clients in both of the programs will be required to open margin accounts with Vision Financial Markets LLC ("VFM") which can allow for substantial leverage in their accounts and will therefore be responsible for maintaining adequate levels of margin in their accounts. If the market moves unfavorably, clients may be required to deposit additional margin upon short notice to maintain their open positions. Clients should be aware that they will have limited ability to withdraw amounts deposited as margin while option positions in their accounts remain open. Clients in both of the programs will also be required to be approved for writing uncovered options.
Clients who open margin accounts will be provided with the full margin disclosure documents. Margin clients should be aware of the following:
- They may lose more funds than are deposited in the margin account;
- VBS or VFM can liquidate any short option position or any other security to cover a margin deficiency;
- VBS or VFM can liquidate positions without first contacting the client;
- Clients are not entitled to choose which securities or other assets in their account(s) are liquidated or sold to meet a margin call;
- The loss on a given short spread is limited to the difference between the two strike prices less the net premium received, after execution charges and any other transaction costs;
- VBS or VFM can increase its "house" maintenance margin requirements at any time and is not required to provide advanced written notice to clients; and
- Clients are not entitled to a time extension on a margin call.
Leverage is a significant part of the investment strategy and creates the risk that a declining price of a stock, in the case of writing puts, may result in a loss greater than the amount deposited as margin. Of course, either type of position can be closed out before the expiration date, thereby ending any right or potential obligation.
The opportunities of the SPWP and SPCSOP are:
- The ability to profit from natural time decay of out-of-the-money short put options;
- The ability to profit from an upward stock trend and/or from a sideways stock trend;
- Access to investment methodologies developed by Howard Rothman, Vision Advisors’ Chief Investment Officer (“CIO”). Mr. Rothman makes the ultimate investment selections or recommendations and actively manages the portfolios;
- Each client’s individual portfolio will be individually managed by the CIO; and
- Portfolios also offer the ability to trade Exchange Traded Funds (“ETFs”) and Indexes. If puts are going to be sold on an Index, the client would have to first be approved for Level 5 options trading.
This is just a summary of the programs. Clients who are interested in one of the above programs should contact their Vision Representative or Vision Advisors at +1.800.317.1994 for more detailed information.