Kona Peak LLC : Volatility Arbitrage

Summary

The Kona Peak Volatility Arbitrage program investment objective is capital appreciation with excellent risk adjusted returns regardless of the overall stock or bond market direction.

Investment Strategy

The goal of volatility arbitrage is to take advantage of differences between the implied volatility of the option, and a forecast of future realized volatility of the option's underlying. The program normally sells high volatility premium and occasionally buys low volatility premium. The primary strategy utilized is selling vertical credit spreads to collect premium with only covered risk-defined positions. The program uses a tactical swing trading time frame and a hybrid systematic/discretionary methodology with key trade signals based on quantitative factors. The Program is diversified across macro asset classes and will trade Emini S&P 500 equity index futures and options, 30 Year Treasury Bond interest rate futures and options, Euro currency futures and options, VIX volatility futures and commodity futures and options including Gold, Crude Oil, and Soybeans.

Risk Management

Prudent risk management is our top priority and an integral part of Kona Peak's trading strategy. Risk management begins at order entry by maintaining relatively small individual positions in the markets we trade and diversifying across macro asset classes. To further manage risk, we primarily sell risk-defined vertical credit spreads which represent about 90% of total overall trades. We automatically fully hedge tail risk at all times via risk defined option spreads and covered futures positions only.