Go Aaron. AutumnGold just released the July performance numbers. Looks like Allani blew up. It's amazing how many CTA types dropped 7 - 10% or more in July.
Who runs Allani? Do you know anything more about them? I've never heard of them before. Thanks for the Autumngold suggestion. Looking down the list there are a lot of negative numbers. I guess that means July was a bad month for long term, diversified trendfollowers. Don't know what was difficult, though. Equities and bond yields continued their uptrends from June. Currencies zigged and zagged a bit. Were currencies the the problem?
Good job Aaron, I predicted you would pull right out of it. Did you maintain position sizing through it all or modify it?
Allani was (is?) Mohamed Allani running out of Switzerland. He had some decent years from 97 to 2000 but had been in the positive single digits the last year or two. In July his two funds lost like 30 and 38%. He had 80M under mgmt. He trades a lot of markets and products, not sure where the problems were or the status of his funds right now. I think it's certainly plausible that the July flat averages hurt some who need volatility. Some may have been burned by the spiking 10yr as well, but most of this list are CTAs - so the real reasons are probably more diverse.
Thanks, EliteThink. Our position sizing, like all our trade decisions, is completely systematic. There are several parameters in the position sizing algorithm, but the most important is account size. Our position sizes are linearly proportional to account size, i.e. "fixed fractional". For every $100,000 under management we're going to trade X contracts, regardless of whether we are in a drawdown or at a peak. Fixed fractional means our monthly percentage return volatility should stay approximately constant regardless of drawdowns and run-ups. We've been running at a 15.6% standard deviation of monthly returns and that has been true throughout the drawdowns and runups of the past two years.
I think that all those guys who said that Aaron wouldn't make it out should come up and fess up and congratulate him. That was one rough hole to climb out of.
Hi everyone, Long-time lurker, 1st post. Anyhow, got a question. Let's say I was eventually planning on setting up a hedge fund that primarily traded equity options and strategies involving equities and equity options. Do you have to go the CTA route in that case or does that only apply to commodity options? Incidentally, does anyone know roughly what % of hedge funds utilize equity options as their primary strategy. I get the sense that it is quite small and this is a relatively unexploited area.
Here is one I've come up with. Any comments are very welcome. This option strategy is for use with "momentum" stocks with low IV relative to historical IV range. By "momentum" I mean stocks with high valuations relative to sales and earnings, positive estimate revisions, and defined uptrends. The strategy is a long-term (6 month to 1 year) bullishly skewed strangle. Buy a call ATM or slightly ITM (to get positive delta and high gamma) and a put ATM or more likely OTM. The thesis behind this trade is this: The stock is highly unlikely to trade sideways. The two most probably results are: 1. Momentum players continue to push the stock upwards in which case the position is profitable due to the starting positive delta and low IV 2. The company has a "negative" event. Either it misses earnings, cuts guidance, or somehow does not live up to market "expectations". The stock is decimated as all the momentum players head for the exits. The put goes ITM and IV goes up substantially. Again the position is profitable To summarize, the position would be profitable under the two most likely scenarios. I have some other option strategies which I think are tailored for specific stock situations such as "value" situations. I look forward to review from some of the more option oriented traders on the site. I am glad to be part of this online community. Thank you.