Patent ID: 6064985
Filing Date: 2000-05-16
Classification: G06Q

Abstract:
An automated method of managing an investment portfolio which contains shares of stock purchased at various stock prices based on an index, and managed by an automated data processing system, comprising:linking said automated manager by a data link to current stock information;selecting an index which contains selected stocks in a ratio, against which to mirror a stock portfolio;establishing portfolio parameters for need for and level of insurance protection, and mix of strike dates of options sold;purchasing stock which is listed on said index to form an investment portfolio which is representative of said index;selling covered calls on said stock in said stock portfolio to receive a premium;using said premium from said covered calls to purchase additional stock, and selling covered calls on said additional stock to receive a premium;using a means of determining an at-risk value of said portfolio which is to be insured from loss by a purchase of puts;using a means of determining an amount of insurance to be purchased to insure said at-risk value of said portfolio against loss;purchasing index puts which if exercised will be worth at least said at-risk value plus a safety factor, as insurance against a decrease in stock prices;using a means of determining a maximum amount to be borrowed against said portfolio which is performed by calculating a formula(E-S)(1.00-D)(0.5)+(0.90G)-I=Maximum Amount of Borrowingwhere E equals long market value of portfolio less U.S.Government securities;S equals short market value of securities;D equals percent of market theoretical drop possible under extreme conditions expressed as a decimal;G equals total value of U.S. Government Securities; andI equals the value of index puts in the portfolioborrowing a maximum amount against said stock portfolio by purchasing stock on margin and selling covered calls on said stock purchased on margin; andadjusting said at-risk value and amount of insurance to be purchased to account for additional stock purchased on margin; andperiodically monitoring said portfolio for compliance with portfolio parameters.