2194 Twain Avenue
Carlsbad, CA 92008
Tel: (760) 809-2700; Fax: (760) 931-6126
Email: info@schwabcapital.com

TRADING PROGRAMS

Imagine not having to worry about which direction the market might be headed...

Our trading strategy is designed to generate profits regardless of the overall direction of the stock market. We work diligently to produce gains each month and attempt to generate a very solid return over the course of a year. Our primary goal is to provide clients with aggressive gains that far outpace the major stock indexes.

Schwab Market Neutral–Option Writing Strategy

Market Neutral Program

Minimum Investment $10,000

Market Neutral is a niche investment strategy with a number of unique advantages. It can be profitable in rising, falling, or sideways markets. Although option writing is still not widely used, it is gaining in popularity.

Our primary investment strategy of our program is to sell (write) options on the CME E-mini S&P 500 stock index futures contract. We may also write options on the CBOT 30 Year U.S. Treasury Bond, CME Euro FX, or other commodities to capitalize on extreme market opportunities.

Our profit objective with this program is 24% – 48% or greater. The trading strategy is flexible enough to profit in rising markets as well as declining markets and can capitalize on the markets volatility. Essentially, the market can move up, down, or sideways within a specific range and still produce profits at, or as it nears, option expiration.

Our program is a proprietary risk based system to consistently and systematically sell options. We do not sell options based strictly on the premium available; rather we sell options based on the statistical analysis of a given strike going "into-the-money". Fundamental, technical, and other strategic analysis are employed to determine the parameters of the trades. The S&P 500 index futures contract is the primary investment vehicle due to its liquidity, contract size, and the percentage distance "out-of-the-money" that strikes could be profitably traded.

Selling uncovered options on a stock index does require the use of leverage and unlimited risk. Our risk controls, which we rigorously enforce, include placing a limit on the number of options we sell and setting prices in advance at which we would hedge, adjust, or close out the positions. All options sold are far "out-of-the- money" options, which means the S&P 500 must move against the option by the amount that it is "out-of-the-money" before there will be a loss at its expiration. This provides a built-in margin of error for moves against short option positions.

What makes Schwab Capital Advisor's method uniquely different than other option selling strategies is that we consider it critical to adhere to strict money management principals to increase the opportunity for success. As such, we believe that an investment strategy can only be as successful as the discipline of the manager to adhere to its trading plan in the face of market adversity. A systematic approach is used to manage the trades whereby decisions subject to behavioral biases are limited. Schwab follows a disciplined program and research has shown that the programs should produce a positive expectation over time. In the "Market Neutral Index Option Program", the average statistical risk of a short option trade going "into-the-money" allows for a high probability for the options to expire worthless. Therefore, if we are successful in managing risk, then we believe the profits will follow.

It is Schwab Capital Advisor's goal to produce consistent positive returns with a maximum monthly drawdown of less than 5 percent not to exceed 10 percent during any consecutive monthly period. As such, the trading strategies have pre-defined profit goals and risk exposure. However, due to the volatile nature of the market, the Advisor cannot guarantee that any drawdown in the account can be limited to the percentage indicated.

Equity Hedge Program

Equity Hedge Program

Minimum Investment $100,000

The Equity Hedge Program is a fundamental program with the purpose of hedging an equity or bond portfolio. It uses technical and fundamental signals for entry and exit while trading mostly in Stock Indexes. Debt (Treasuries), Currencies, and Energy futures are used to hedge against stocks when fundamentals warrant. The strategy utilizes credit spread option trades as its investment method.

 

Past performance is not indicative of future results. The risk of loss, inherent in an options writing program is substantial. An investor could potentially lose more than the initial investment. Investors must read the current disclosure document before they invest.