Category: Alternative Investment Strategy

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Alternative Investment Strategy

The Impact of Innovation on Commodity Price Forecasting

Forecasting is difficult for any financial asset but can be especially difficult for commodities. The peculiarities of futures, the potential for large supply shocks, and the higher volatility are associated with the varied interaction of hedgers and speculators. Still, there is also something that makes medium-term forecasts especially difficult – innovation. Innovation and technical change […]

Alternative Investment Strategy

It Is All About the Volatility Management

For many investment strategies, the difference between a good and a bad manager is based on their ability to manage risk. It is as much about how volatility is handled as return generation. A good strategy that does not manage risk well will never be successful. A key conclusion from a recent paper that focuses […]

Alternative Investment Strategy

Speculation – It is Not Supposed to be Glamorous

The history of the bull speculation in cotton of 1903 will never be fully written because, though the men who influenced it are very interesting, their operations are interwoven with bloodless statistics and tiresome technicalities. -Edwin Lefevre Saturday Evening Post, August 29, 1903 from The Cotton Kings: Capitalism and Corruption in Turn-of-the-century New York and New […]

Alternative Investment Strategy

Hedge Funds

Hedge fund returns are a combination of alpha and beta risk exposure. The betas across different hedge fund styles are variable and dynamic. In general, beta will be below one, with most hedge funds showing market betas between .3 and .6. Some hedge fund styles, like managed futures, may be lower. Alpha can also be […]

Alternative Investment Strategy

Equity Hedge Funds Generate Strong Gains in September

DISCLAIMER: While an investment in managed futures can help enhance returns and reduce risk, it can also do the opposite and result in further losses in a portfolio. In addition, studies conducted on managed futures as a whole may not be indicative of the performance of any individual CTA. The results of studies conducted in the […]

Alternative Investment Strategy

Skew Risk, Volatility Risk, and Managed Futures

Some new research on risk parity makes provocative comments on the risk and potential value of managed futures in a portfolio. In one of our previous posts, we cited this recent work suggesting that accounting for skew can be helpful relative to a risk parity approach focused on volatility. See Messy markets, mixed distributions, and skew – […]

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Alternative Investment Strategy

Messy Markets, Mixed Distributions, and Skew – Thinking About Downside Risk

We often only think about markets in terms of risk and return where risk is measured by the standard deviation of returns. It is easy to calculate and update. Unfortunately, the changing nature of markets makes for messy calculations and analysis. Assuming a normal distribution is just too simple for measuring risk. Investors have to be aware of skew in return distributions. More specifically, investors have to account for negative skew because the unexpected extra downside risk is what really hurts portfolio returns.

Alternative Investment Strategy Managed Futures Education

The Importance of Limiting Losses in Absolute Return Strategies

Absolute return strategies aim to generate positive returns irrespective of market direction. A more accurate and appropriate definition is that absolute return, or active investment management, always seeks to minimize losses. We mentioned this as a core attribute of an absolute return strategy in “Why an Absolute Return Strategy,” but this simple concept is worth […]

Alternative Investment Strategy Commodity Trading Advisor Managed Futures Education

Building Wealth: The Power of Absolute Return Strategies

The first goal of investing is to increase wealth or, to put it differently, to increase purchasing power. Warren Buffet says, “Rule 1 of investing is never losing money. Rule number 2 is never forget rule number 1.” The hidden message in these seemingly obvious statements is that building wealth depends much more on preventing […]

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Alternative Investment Strategy Managed Futures Education

Advantages & Disadvantages of Call Options for Hedgers & Speculators

Buying (Long) a Call Option: A basic option strategy to be familiar with and learn the advantages and disadvantages of is buying a Call Option (Long Call). Buying a call option is the opposite of buying a put option in that buying a call gives you the right, but not the obligation, to buy the […]

Alternative Investment Strategy Commodities

Bulls Being Lured in With Dropping Rig Counts

CNBC is running out of credible, bullish analysts on the oil complex. The calls for $65+ WTI seem relatively sparse. Is anybody in their right mind still thinking crude oil is going higher? Of course. We all know Keynes’ saying, “The market can stay irrational longer than you can stay solvent.” But seriously, how much […]

Alternative Investment Strategy Managed Futures Education

Understanding the Long Put Option: Advantages, Disadvantages, and Trading Steps

Buying (Long) a Put Option:A basic options strategy to be familiar with and learn the advantages and disadvantages of is Buying a Put Option (Long Put). Buying a Put option is the opposite of buying a call option in that a Put gives you the right, but not the obligation, to sell the underlying futures contract at a specific […]

Alternative Investment Strategy

Oil DOE Preview: Saudi Royal Family Plays Games?

At 10:06 EST Tuesday, news broke from Dubai-based Al Arabiya that the Iranians had sieged a US cargo vessel in the Gulf. Brent and WTI spiked within minutes as the algos went wild. However, both markets failed to breach yesterday’s high. Within an hour, the market erased these gains as it turned out this was […]

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