T-Portfolio
The Total Portfolio offers an alternative trading strategy designed for experienced investors who have a higher tolerance for risk. This portfolio is not for everyone due to risk levels and margin requirements. Investors in this portfolio must qualify for trading options and must also qualify to trade on margin. There is no guarantee that an investor that wishes to participate in the Total Portfolio will be approved to do so. As with any margin account, there is an underlying risk of having a position sold out if a margin call is not met on a timely basis.
In this portfolio, the manager will seek long term objectives consistent with the other portfolios available through Vision Advisors. However, Vision Advisors will have discretion to employ other alternative strategies or opportunistic trades in order to take advantage of perceived opportunities in the market. For example, Vision Advisors may wish to employ a complex options strategy to exploit a current market situation.
These strategies may subject the client to margin calls. The client will be required to open a margin account which can allow for substantial leverage in their account. Clients will be responsible for maintaining adequate levels of margin. Also, clients should be aware that they will have limited ability to withdraw funds deposited in their margin account if there are open positions in the account.
Clients who open margin accounts will be provided with full margin disclosure documents. Margin clients should be aware of the following:
- They may lose more funds than are deposited in the margin account;
- The firm can force the sale of securities or other assets in a client’s account(s);
- The firm can sell securities or other assets without 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 firm 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.
The Total Portfolio provides Vision with the flexibility to utilize some or all of the other strategies offered through the Equity, Dividend, Balanced and/or Fixed Income Portfolios. In addition, Vision Advisors may write naked put options, enter credit spreads (using either puts or calls), short stocks and/or take other actions in a client’s account including the use of margin to leverage assets in the account.
A short put is simply the sale of a put option. The buyer of a short put option has the right, but not the obligation, to sell shares of stock back to the seller at a given price ("strike price"). This strategy is generally used when the option seller expects the share price to remain steady or increase slightly over the life of the option. The maximum profit the investor can make is the premium received from selling the option. The maximum loss that the investor can incur from selling an uncovered short put ("naked put") is unlimited in a falling market. Selling a naked put refers to selling a put option without owning the underlying stock.
A credit put spread ("bull put spread") is created by purchasing one put option while simultaneously selling another put option with a higher strike price of the same underlying security. This type of strategy is known as a credit spread because the premium received by selling the put option with a higher strike price is greater than the cost of purchasing the put with the lower strike price. An investor would utilize this strategy when he or she expects a moderate rise in the price of the underlying stock. Regardless of how the price of the underlying stock moves, the maximum loss is limited to the difference between the two strike prices (minus the net credit received from the difference of the option premiums). The maximum profit an investor can make is equal to the difference between the premium received from the short put and the premium paid for the long put (the "net credit").
A short straddle is a combination of writing uncovered calls (bearish) and writing uncovered puts (bullish) of the same underlying security, strike price and expiration date. Together, they produce a position which is considered neutral. An investor would utilize this strategy when he or she expects the underlying stock to stay within a narrow range. The profit is limited to the premiums received from the put and call. The maximum loss the investor can incur from selling a short straddle is unlimited in both a rising and falling market, as the price of the underlying stock may move far beyond the strike prices of the call or put.
Short selling is selling a stock that the seller does not own. More specifically, a short sale is the sale of a security that is not owned by the seller, but that is promised to be delivered. The stock could come from the brokerage firm’s own inventory or it must be borrowed. The shares are sold and the proceeds are credited the client’s account. In the future the seller is obligated to repurchase the same number of shares that were borrowed. If the price drops then the profit is the difference between the price that the stock was borrowed at and the price paid to buy back the shares. If the stock appreciates then the loss that can occur is the difference between the price the stock is bought back at and the original selling price.
The investment methodologies at Vision Advisors have been developed by Howard Rothman, its Chief Investment Officer. Mr. Rothman makes the ultimate investment selections and recommendations, and personally (though not solely) monitors each investment portfolio.
