Kawaller & Company LLC : Long Option Convergence Trading

archived programs
Year-to-Date
N / A
Sep Performance
-1.62%
Min Investment
$ 25k
Mgmt. Fee
2.00%
Perf. Fee
10.00%
Annualized Vol
48.46%
Sharpe (RFR=1%)
0.36
CAROR
8.17%
Assets
$ 2.2M
Worst DD
-56.80
S&P Correlation
-0.12

Growth of 1,000 - VAMI

Monthly Performance

Export Data
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD DD

Past performance is not necessarily indicative of future results. The risk of loss in trading commodity futures, options, and foreign exchange ("forex") is substantial.

Period Returns

Program / Index Sep Qtr YTD 1yr 3yr 5yr 10yr Since
7/1999
Long Option Convergence Trading -1.62 - - - - - -3.16 161.78
S&P 500 -7.18 - - - - - 8.68 160.71
+/- S&P 500 5.56 - - - - - -11.85 1.07

Strategy Description

Summary

Understanding our approach requires an appreciation of the difference between the spot price (relevant for imminent delivery) for any good or commodity and a futures price (relevant for delivery at some prescribed time in the future) for that same good. Ultimately, when futures contracts... Read More

Account & Fees

Type Fund
Minimum Investment $ 25k
Trading Level Incremental Increase $ 10k
CTA Max Funding Factor
Management Fee 2.00%
Performance Fee 10.00%
Average Commission $0
Available to US Investors Yes

Subscriptions

High Water Mark Yes
Subscription Frequency 15-30 Days
Redemption Frequency 15-30 Days
Investor Requirements Any Investor
Lock-up Period 0

Trading

Trading Frequency 500 RT/YR/$M
Avg. Margin-to-Equity 0%
Targeted Worst DD -5.00%
Worst Peak-to-Trough 50.68%
Sector Focus Financial & Metals Traders

Holding Periods

Over 12 Months 5.00%
4-12 Months 15.00%
1-3 Months 25.00%
1-30 Days 55.00%
Intraday 0%

Decision-Making

Discretionary 50.00%
Systematic 50.00%

Strategy

Option-purchasing
100.00%
Strategy Pie Chart

Composition

Interest Rates
100.00%
Composition Pie Chart

Summary

Understanding our approach requires an appreciation of the difference between the spot price (relevant for imminent delivery) for any good or commodity and a futures price (relevant for delivery at some prescribed time in the future) for that same good. Ultimately, when futures contracts expire, these two prices must necessarily converge. While this price convergence may be either a cost or benefit to futures traders, we restrict our activities to buying options on futures contracts – but only when this convergence effect works in our favor to a greater extent than option time decay works against us. While purchasing options has the attribute of offering the potential of unlimited gain with limited risk, these options have the added benefit of necessarily appreciating if held to their expirations when underlying spot prices are stable. This is a condition that can be determined at the point of purchase, and we believe it to be an edge that is available only in connection with the market for options on futures contracts.

Investment Strategy

While the above philosophy dictates the allowable portfolio holdings, the size of our positioning is discretionary. We employ a systematic process of adding to our positions when eligible options become cheaper and reducing our holdings when these same options become more expensive. This process enforces a discipline of buying low and selling high. Most funds achieve leverage through debt.

Risk Management

A purchased option offers the prospect of unlimited gains and limited losses, equal to the original price paid for the option. Thus, given that our portfolio is restricted to long options, the amount at risk at any point in time is the value of the options held. Our “value at risk” is truly the amount of option premium we have expended. This is a concrete, real number, as opposed to a theoretical abstraction that changes with each and every adjustment to the portfolio. We necessarily conserve the vast majority of our capital at any point in time, to assure (a) that the magnitude of those losses will be contained and (b) that we’ll maintain sufficient capital to continue trading after these current losses are realized.

   

Past performance is not necessarily indicative of future results. The risk of loss in trading commodity futures, options, and foreign exchange ("forex") is substantial.

Reward
Average RoR:
Max Gain:
Gain Frequency:
Average Gain:
Gain Deviation:
Risk
Standard Deviation:
Worst Loss:
Loss Frequency:
Average Loss:
Loss Deviation:
Reward/Risk
Sharpe Ratio: (RF=1%)
Skewness:
Kurtosis:
Reward
Compound RoR:
Average RoR:
Max Gain:
Gain Frequency:
Average Gain:
Gain Deviation:
Risk
Standard Deviation:
Worst Loss:
Loss Frequency:
Average Loss:
Loss Deviation:
Reward/Risk
Sharpe Ratio: (RF=1%)
Skewness:
Kurtosis:

Past performance is not necessarily indicative of future results. The risk of loss in trading commodity futures, options, and foreign exchange ("forex") is substantial.

Note: Figures shown in the Monthly column are the greatest figures (or worst for losses/drawdowns) for any particular month. The Annual figures are the greatest for any calendar year.

Drawdown Report

Depth Length (Mos.) Recovery (Mos.) Peak Valley
-56.80 22 6 1/1/0001 4/1/2001
-50.68 47 - 3/1/2004 2/1/2008
-35.47 5 2 10/1/2001 3/1/2002
-25.32 2 8 5/1/2003 7/1/2003
-18.10 2 1 9/1/2002 11/1/2002
-3.88 1 1 12/1/2002 1/1/2003
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Consecutive Gains

Run-up Length (Mos.) Start End
320.03 6 4/1/2002 9/1/2002
144.72 4 7/1/2001 10/1/2001
65.59 2 1/1/2000 2/1/2000
64.48 1 10/1/1999 10/1/1999
56.26 5 6/1/2000 10/1/2000
45.88 5 3/1/2008 7/1/2008
35.03 1 12/1/2002 12/1/2002
33.54 4 12/1/2003 3/1/2004
31.17 4 2/1/2003 5/1/2003
28.47 4 3/1/2005 6/1/2005
24.29 4 3/1/2007 6/1/2007
23.01 2 8/1/2003 9/1/2003
21.26 2 12/1/2006 1/1/2007
16.28 10 1/1/2010 10/1/2010
14.41 2 7/1/2004 8/1/2004
10.49 5 7/1/2009 11/1/2009
8.30 5 5/1/2006 9/1/2006
7.01 2 4/1/2009 5/1/2009
5.04 2 1/1/2002 2/1/2002
3.91 3 4/1/2011 6/1/2011
3.42 1 8/1/2005 8/1/2005
2.51 1 5/1/2001 5/1/2001
1.97 2 1/1/2009 2/1/2009
1.82 1 8/1/2011 8/1/2011
1.08 1 10/1/2004 10/1/2004
0.97 1 12/1/2010 12/1/2010
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Consecutive Losses

Run-up Length (Mos.) Start End
-55.31 3 7/1/1999 9/1/1999
-52.87 6 11/1/2000 4/1/2001
-38.31 8 7/1/2007 2/1/2008
-38.10 3 4/1/2004 6/1/2004
-34.56 3 3/1/2000 5/1/2000
-31.02 5 8/1/2008 12/1/2008
-26.36 2 11/1/1999 12/1/1999
-25.32 1 3/1/2002 3/1/2002
-25.32 2 6/1/2003 7/1/2003
-21.17 8 9/1/2005 4/1/2006
-18.17 2 10/1/2003 11/1/2003
-18.10 2 10/1/2002 11/1/2002
-17.75 2 11/1/2001 12/1/2001
-12.46 4 11/1/2004 2/1/2005
-10.42 1 7/1/2005 7/1/2005
-6.33 1 9/1/2004 9/1/2004
-5.81 2 10/1/2006 11/1/2006
-5.57 1 2/1/2007 2/1/2007
-5.39 3 1/1/2011 3/1/2011
-3.88 1 1/1/2003 1/1/2003
-3.40 1 12/1/2009 12/1/2009
-2.42 1 11/1/2010 11/1/2010
-1.62 1 9/1/2011 9/1/2011
-1.00 1 7/1/2011 7/1/2011
-0.72 1 6/1/2009 6/1/2009
-0.36 1 3/1/2009 3/1/2009
-0.30 1 6/1/2001 6/1/2001
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Time Windows Analysis

 1 Month3 Month6 Month12 Month18 Month2 Year3 Year4 Year5 Year
Number of Periods147.00145.00142.00136.00130.00124.00112.00100.0088.00
Percent Profitable54.4255.1757.0454.4153.0857.2650.0052.0061.36
Average Period Return1.565.4612.3326.9950.6875.81108.52110.02108.94
Average Gain9.2820.3334.3663.90111.96146.14231.79226.84190.92
Average Loss-7.67-12.83-16.92-17.07-18.63-18.41-14.75-16.54-21.26
Best Period64.48130.33320.02411.12633.49822.04847.24739.41508.49
Worst Period-40.36-55.31-52.87-51.18-47.33-55.85-44.39-49.25-49.58
Standard Deviation13.9928.3448.0081.42140.35184.58198.69181.44157.71
Gain Standard Deviation13.0129.0852.9295.32170.65219.17220.46186.58151.57
Loss Standard Deviation8.4612.1012.4413.1412.0811.1211.4510.6014.76
Sharpe Ratio (1%)0.110.180.250.320.350.400.530.580.66
Average Gain / Average Loss1.211.582.033.746.017.9415.7113.718.98
Profit / Loss Ratio1.451.952.704.476.8010.6315.7114.8614.26
Downside Deviation (10%)7.8612.3815.0717.3419.8020.1823.2727.7432.73
Downside Deviation (5%)7.7111.8913.9915.0416.0515.1714.9216.0218.72
Downside Deviation (0%)7.6811.7713.7314.5015.1714.0213.1613.5716.01
Sortino Ratio (10%)0.150.340.651.272.183.253.993.192.48
Sortino Ratio (5%)0.190.440.851.733.064.877.076.615.55
Sortino Ratio (0%)0.200.460.901.863.345.418.258.116.80

Top Performer Badges

Index Award Type Rank Performance Period

Past performance is not necessarily indicative of future results. The risk of loss in trading commodity futures, options, and foreign exchange ("forex") is substantial.