CTA versus a Commodity Pool

Discussion in 'Commodity Futures' started by golb0016, Oct 13, 2011.

  1. golb0016


    I'm looking at doing a $10k CTA account or commodity pool but I want to make sure I understand both thoroughly first. From what I understand you enter a CTA at the exact price level and your account gets traded with the same strategy as everyone else in the group. With a commodity pool you can put in any amount and you just get a proportional return to whatever you deposited. With a commodity pool the advantage is being able to participate in larger contracts that you wouldn't be able to as an individual, correct?

    Are there any restrictions on when you can enter or close an account with either type of account? I saw something on a website how commodity pools are not subject to margin calls but that doesn't seem right to me as you'll still be using leverage. Any truth there?

    Basically what are the restrictions, advantages and disadvantages of both. Thanks for any help!
  2. MGJ


    A CTA who offers to trade your account, will give you a document called a "Disclosure Document." Read it. The CTA won't trade your account until you've signed an affadavit saying that you've read the Disclosure Document.

    A commodity pool who offers you an interest in the pool (an ownership share) will give you a document called a "Private Placement Memorandum." Read it. The pool won't take your money or give you an ownership share, until you've signed an affadavit saying you've read the Private Placement Memorandum.

    Both of these documents have been carefully scrutinized and not-disqualified by the regulatory body ("NFA" in the usa). The docs will highlight the risks quite dramatically. Read them.

    One of the benefits of using a CTA is transparency - you can see the trades in real time if you wish. You can tell whether or not the CTA is behaving like Bernie Madoff and, unlike Madoff's hedge fund, YOU control the money -- you can draw it all out in two minutes if you so desire. Another benefit is the possibility of notional funding which is only for grownups; if you don't know what it is then you don't want it.

    One of the benefits of using a pool is greater capitalization: the account has more money so it can trade "bigger" contracts and it can trade a bigger portfolio of products simultaneously. Another benefit is that a pool can allocate money to several trading managers; in effect, a pool can have a portfolio of CTAs. So you can potentially get lots more diversification.