Options Sellers, Meet Volatility

Three weeks ago we wrote this newsletter detailing the recent comeback seen by options sellers and short volatility strategies.  The crux of the story was that while these strategies had made an impressive comeback after two years of disappointing performance, that investors should still be wary of the potential for losses during the next volatility spike. Well the volatility spike that we were all waiting for started gaining steam last week before hitting the max capitulation point yesterday in precious metals. The results, as you might expect, are not pretty.

Option CTA Performance April 2013

Program

MTD %*

Max DD*

Strategy Type

Newport Private Capital – Optimum Income

0.15%

-1.42%

Options

Global Sigma LLC -Global Sigma Plus (QEP Only)

-1.27%

-3.31%

Options

Bluenose Capital Management LLC – BNC EI

-4.06%

-6.32%

Options

White River Group Stock Index Option Writing

-5.13%

-18.73%

Options

Bluenose Capital Management LLC – BNC BI

-8.35%

-8.35%

Options

White River Group Diversified Option Writing

-31.09%

-31.09%

Options

*Attain estimate. Disclaimer: past performance is not necessarily indicative of future results.

Kudos to Newport for weathering the storm so far. As for the rest it is disappointing to see that the mistakes made by so many option programs in years past have been repeated again. New max drawdowns were set by Bluenose BI and White River Group. We’ll be in touch with the managers to discuss risk management, what went wrong, and reach out to clients with our thoughts moving forward.

On the positive side of things – the managers we expect to thrive during a volatility spike have done their job as evidenced by the top performing programs month to date:

Program

MTD %*

Max DD*

Strategy Type

Quest Partners – AlphaQuest Original (QEP Only)

4.96%

-24.60%

Multi Strategy

Rosetta Capital Mgt. LLC – Macro (QEP Only)

3.29%

-17.36%

Specialty

Dominion Capital Management Sapphire (QEP Only)

3.21%

-17.32%

Short Term

Protec Energy Partners LLC – ET1

3.19%

-14.43%

Specialty

T2 & Associates Original (QEP Only)

2.25%

-16.51%

Stock Index

Global AG. LLC (QEP Only)

2.15%

-17.57%

Agriculture

Integrated Managed Futures Corp. Global Conc. (QEP Only)

2.11%

-19.34%

Multi Strategy

Covenant Capital Management Aggressive

1.52%

-20.41%

Trend Following

Soaring Pelican – Automated Futures Trading (QEP Only)

1.18%

-9.24%

Stock Index

2100 Xenon Managed Futures (2x) Program (QEP Only)

0.37%

-19.11%

Multi Strategy

Futures Truth MS4 (QEP Only)

0.24%

-9.67%

Multi Strategy

Newport Private Capital – Optimum Income

0.15%

-1.42%

Options

Auctos Capital Management Global Div.  (QEP Only)

0.03%

-12.22%

Multi Strategy

Stenger Capital Management Diversified Trading

0.00%

-0.55%

Specialty

*Attain estimate. Disclaimer: past performance is not necessarily indicative of future results.

Today’s whiplash rally reversing some of yesterday’s broad selloff was not what the longer-term trend followers were hoping to see, but we’ll have to wait to find out whether we’ve seen the end of the trend, or just the beginning.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.