I do read the free stuff on NGI and the ticker on Bentek, and I have tried the NGI free subscription, it's decent but I don't trade enough to pay the thousands of dollars per year to subscribe in full. Do you have the "Energy" Trade the News subscription or the regular TTN subscription?
where is the hedge in these positions, these guys are hiding under "hedge fund" name umbrella while pilling on huge one way positions cowboy style..
That's how you make the big bucks... load the boat with OPM and get to keep 20% of the profits for yourself. And if you blow up, you say, "I'm sorry, but you knew this was risky business". Sweet deal, no?
I think the hedge lies in that if the fund explodes the partners can bailout and join another fund. Actually I always thought the hedge referred to the fact that the first hedge funds took inflationary hedging trading strategies, such as buying gold/silver, that mutual funds could not execute, and not that they actually hedged their trades. I'm not sure though.
regular. don't pay more than 50. they also put on weather derivates reports occasionally. pretty good.
Thinking about the Amaranth spread trade, it's not really any less risky if you use full margin, since spread trades have only a $2300 per NG spread maintenance margin requirement versus $10700 per contract for a one sided trade, so you can increase your exposure five times over with the same amount of capital. So a $1 change in the spread would be equivalent to a $5 change in the underlying (if doing a one sided trade). Additionally, trading the same amount of capital via a spread position would require about 10 times as many contracts as a one sided bet, and if you do that with far out contracts as in Hunter's case you have a big arse liquidity problem. In Brian Hunter's case I think there was a $1.20 -$2 decrease in the spread between March and April 2007 (March dropped closer to April's price, from March being +$2.40 above April to $1.20), so I guess that highlights how he was screwed, that's like a $6-$10 loss in a straight one sided trade. March has actually crossed under April now so the spread is going the other way, April is more expensive than March, whereas Hunter was betting March would remain more expensive than April and become even more expensive than April as time wore on.
I'm not sure it was specifically inflationary hedging, rather I believe that the first hedge funds were equity funds that could take both long and short positions, with the idea that picking stocks and being able to go long or short is easier than being long only and trying to time the market using cash. Or something like that...
Thinking about the Amaranth spread trade, it's not really any less risky if you use full margin, since spread trades have only a $2300 per NG spread maintenance margin requirement versus $10700 per contract for a one sided trade, so you can increase your exposure five times over with the same amount of capital. So a $1 change in the spread would be equivalent to a $5 change in the underlying (if doing a one sided trade). Additionally, trading the same amount of capital via a spread position would require about 10 times as many contracts as a one sided bet, and if you do that with far out contracts as in Hunter's case you have a big arse liquidity problem. In Brian Hunter's case I think there was a $1.20 -$2 decrease in the spread between March and April 2007 (March dropped closer to April's price, from March being +$2.40 above April to $1.20), so I guess that highlights how he was screwed, that's like a $6-$10 loss in a straight one sided trade. March has actually crossed under April now so the spread is going the other way, April is more expensive than March, whereas Hunter was betting March would remain more expensive than April and become even more expensive than April as time wore on.
you can have a spread move while the outrights stay still. point risk trading spreads is usually within the 0-2.00 range, while outright positions obviously are completely exposed. problem with everything is that when you have less supposed volatility, leverage gets piled on to offset that. hence, 1-2 minis outright could said to equal 1 full size spread (long short one month) in risk exposure, realistically speaking. A $1.00 move on 1 spread is $10000, equal to a $4.00 move on 1 mini... spread trading is nothing to laugh at - and there is indeed risk wherever you look.