Event Driven Strategy

Ever try to talk to someone who is about to get married? All they can talk about is wedding planning. Event-driven strategy.

In investing, it refers to making decisions around things that happen. The goal is to identify an event on the horizon that has some potential to move a security...say, a company's earnings release or a decision on one of the company's drugs by the FDA. Then you set a position ahead of the event, and hope to make some money.

You guess the FDA will approve the company's drug, so you buy the stock. Then you wait for the event. On the day, the FDA announces that the drug is approved. The stock goes up (along with every stock of every remotely close competitor or similarly focused company)...you sell the shares and book the profit.

Using the event-driven strategy, you aren't making long-term determinations about the company's fortunes. You are gaming the potential outcome of one particular upcoming event, and attempting to predict the likely market response.

Like how you assume they will do the chicken dance at your distant cousin's wedding, and you do whatever it takes to get an invitation, because you really, really love the chicken dance. Event-driven strategy.