Typhon Capital Management, LLC : Plutus Grain Strategy

Summary

The Plutus Grain Strategy is a discretionary, diversified grain strategy that aims to capture returns from the grain markets with a low correlation to traditional assets. This methodology prioritizes capital preservation and seeks to provide returns at a relatively low level of volatility when compared to most other grain strategies. This strategy became operational on the Typhon platform in September 2010.

Investment Strategy

The Plutus Grain Strategy is a discretionary strategy based on a combination of supply/demand fundamentals and technical analysis which attempts to define trends and/or changes in trends in various agricultural commodity markets. Fundamental analysis incorporates factors such as production, domestic and foreign demand, storage cost and availability, governmental issues, and weather, both in the United States and around the world. PGS primarily trades agricultural futures spreads including but not limited to corn, soybeans, wheat, soybean meal, soy oil, oats, and rice with trade allocations between the commodities based on potential risk vs. reward. Positions taken are primarily spreads: Intra-commodity spreads between calendar months (example: December corn vs. March corn), Inter-commodity spreads between different commodities (example: December soy oil vs. December soybean meal), and Inter-market spreads between markets (example: Chicago December wheat vs. Kansas City December Wheat). Using spreads as the primary source of position in an attempt to minimize the volatility of trading futures. Approximately 90% of the PGS’s positions utilize futures spreads. Additionally, the PGS may take positions in the futures and or options markets when market conditions meet our risk parameters. The PGS does not engage in selling options short.

Risk Management

Positions taken are primarily spreads: Intra-commodity spreads between calendar months (example: December corn vs. March corn), Inter-commodity spreads between different commodities (example: December soy oil vs. December soybean meal), and Inter-market spreads between markets (example: Chicago December wheat vs. Kansas City December Wheat). Using spreads as the primary source of position in an attempt to minimize the volatility of trading futures. Approximately 90% of Plutus’s positions utilize futures spreads. Moreover, the strategy generally maintains a sub-5% margin-to-equity ratio, and never exceeds 10%. Plutus may take positions in the futures and or options markets when market conditions meet our risk parameters. Plutus does not engage in selling options short.