Orbits Venture, Inc. : Risk Sigma Program No. 2

Summary

“Risk Sigma” is a short term “mean reversion” trading program focused on S&P 500 Futures and Options. It has average 5~10 days holding period. Shorter trading time frame and higher turnover seeks to reduce program volatility exposure and draw downs.

Our strategy is generated by rigorous mathematical and quantitative models without having doctrinaire perspective favoring any prescribed textbook investing or trading methodology. Following the ebb and flow of market actions, we not only look at absolute returns but also focus on risk adjusted returns.

“Risk Sigma” is available through managed accounts and offers daily transparency. We trade liquid product and can offer weekly liquidity. The program’s goal is to maintain a Sharpe Ratio of high 2. The design of “Risk Sigma” is not keyed or correlated with other major indices such as S&P500, and thus offers great diversification value to investors.

Investment Strategy

“Risk Sigma” invests in S&P 500 Futures and Options with the objective of achieving consistent capital growth, which aims to be uncorrelated with the S&P 500 index and other major hedge fund indices. The goal is to achieve consistent absolute returns in all likely future market scenarios and to provide added-value as a diversification to portfolios that already have other assets, such as trend-following or momentum strategies.

The program is model-driven. It seeks to generate returns from both volatility and directional market. The program may express its market views by shorting calls at intermediate term tops, shorting puts at intermediate bottoms and shorting strangles at range market. It may also long or short futures to hedge the portfolio risk.

Risk Management

Our risk management system has been designed to produce consistent returns with controlled volatility instead of occasionally outsized returns as experienced in most trend following systems. A combination of risk management and portfolio cash allocations is tailored to be consistent with the individual investor’s resources and risk tolerance.

Trading SP500 index futures and options sees large daily market volumes. After witnessing the vacuum market conditions observed around the market extremes in the last one and half decades, we decide to put liquidity as first priority. Losing money is bad for an investment manager; losing money and leaving investors with illiquid positions is simply unacceptable.