At MorningView Capital, we go beyond looking for the next high-flying stock or attempting to time the market, we focus on odds and probability. Despite the most attractive fundamentals or best looking chart, when you purchase a stock, the odds are still just 50 / 50 the stock’s share price will increase.

While we do believe that we are skilled stock pickers and market timers, our focus is to structure a position with a higher probability of success than just 50%. Rather than hoping to beat the odds by just purchasing stock or buying options, we employ trading strategies that also involve selling options. The result is that our break-even point is lower than it would have otherwise have been.

Paramount to our success is our ability to match the specific circumstances surrounding a stock with the right, high probability options strategy. We use several strategies that involve the sale of options on at least one leg of a trade. Here are some examples:

Covered calls
Covered strangles
Collars
Diagonal debit & credit spreads
Vertical credit spreads

It should be noted that, with the exception of a calculated Naked Put strategy, we do not sell naked options that expose the account to unlimited risk.

When looking for new trading opportunities, we first determine if a particular stock is trading at, below, or above its fundamental per share valuation. Next, we compare the stocks PE ratio with its sector peers. Then, we look to see if the company’s quarter- over- quarter earnings growth is increasing or decreasing. This is followed by performing a technical analysis to determine if the stock is trending up, down, or sideways and whether it is overbought or oversold. Finally, we combine our fundamental and technical analysis to determine which direction and range we believe the stock will move, over both short and long-term periods.

After completing our fundamental and technical analysis, we look to see if we can structure a position that has a higher probability of success than what we’d get from simply purchasing that particular stock or ETF.