stocks investment strategy, profitable options
Investment strategy as a holistic concept of activities in the securities market consists of four closely interrelated elements:
substantiation of strategy - a theoretical view on what constitutes a source of income to the investor realizing the strategy;
the principle, lying in the basis of the choice of the securities for investment operations (for example, selected only paper issuers a particular industry; only the securities of issuers with some measures of the financial statements; only paper issuers, under specific conditions, for example, bankruptcy, or restructuring; only paper issuers, the prices of which show a certain figure of technical analysis, etc.);
methodology of sampling and analysis of data relevant to making an investment decision;
technology of investment operations with the securities securities (security), on the basis of obtained during the analysis of data information. In this item also includes a presentation of the structure of typical position, built in the framework of the strategy: the kinds of securities, the direction of the positions (long, short), date of expiration for derivatives, volumes and prices opening and closing the positions, the price levels at which it is planned to fix the position, etc.
There are active and passive investment strategies. Passive strategies entail building a widely diversified market portfolio. Active position involve the creative search of opportunities in excess of the risk-free market returns. The choice of one or another group of strategies is determined by the perceptions of the investor about the rationality of the market as a whole. The efficient market hypothesis, which is being developed in the framework of the neoclassical economic theory, argues that, if market participants are rational, there is no way to beat the market. However, the prevalence of many investment strategies is in contradiction with the hypothesis of the efficiency of the market. The hypothesis about the efficiency of the market rests on the neo-classical understanding of rationality. As already noted, in science there are other, alternative interpretations of rationality. Systematization of these interpretations should be preceded with the systematization of investment strategies. Therefore, active investment strategy, which adhere to the participants of the market to develop investment decisions, can be divided into four large categories: situational, the relative value of hedging market and speculative.
The group of situational strategies includes the strategy of arbitration at the shares of companies that are in the process of the merger, sale of the encumbered securities (including mortgage securities), and other unique clearly-defined situations in the life of the Corporation, such as the restructuring or the allocation of subsidiaries.
Source yield strategies of this group is the wrong assessment of the Issuer's shares market due to the inherent uncertainty of the situation-or for reasons connected with the psychology of market participants. Formation of a portfolio is based on the principle of the availability of clearly visible specific situation, which has economic implications for the value of the Issuer, a non-obvious to other market participants, and therefore potentially undervalued. Collection and analysis of data occurs primarily in accordance with the principles of the classic version of the fundamental analysis set out in the works of B. Graham, H. Dodd. Technology of investment operations depends on the particular strategy.
