Crediton Hill LLC : Crediton Hill Managed Account Program

Summary

Crediton Hill Managed Account Program trades S&P 500 index futures and options in the form of discretionary risk taking. Typical holding period of positions ranges from a few days to a couple of weeks. The program aims to provide high Sharpe ratio returns for the investors.

Investment Strategy

The program aims to identify cheapest and richest options on the S&P 500 index by taking into consideration the implied volatility and realized volatility differences vs. their historical averages on the relevant parts of the volatility surface. This rich-cheapness analysis, coupled with Crediton Hill's proprietary analysis of the short term S&P 500 index trend, results in option buying as well as selling decisions on certain out-of-the-money short-dated options. The distinctive use of the trend analysis is effectively an improvement of the log-normal distributional assumption of typical option pricing methodology and has served the program well since inception.

Risk Management

A prominent feature of the program is that heavy hedges are typically placed in the opposite direction of large positions for the purpose of mitigating severe adverse market movements. When these severe adverse market movements do cross certain thresholds, we simultaneously unwind our positions and their hedges, often resulting in positive PNL.