Vantage Capital Management : VCM Aggressive Program

Summary

Vantage Capital Management (VCM) is a Commodity Trading Advisor (CTA) registered with the Commodity Futures Trading Commission (CFTC) and a member of the National Futures Association (NFA).We manage capital for individuals, including IRA, SEP, and 401K accounts that can be traded tax deferred, and for institutions such as banks, hedge funds, pension funds, and trusts.Philosophy:While no strategy can guarantee profits, and there is a risk of loss, our philosophy is to provide clients with elevated performance. VCM strives to balance risk by remaining direction neutral and performing in a manner that is statistically uncorrelated to the performance of the S&P 500 Index. VCM’s strategies avoid forecasting specific market direction, but rather take both sides of the market, which enables VCM to profit in up, down, and lateral markets. VCM’s proprietary trading strategy does not “day trade” or attempt to time the market.

Investment Strategy

VCM Aggressive Program:The strategy writes both put and call option contracts on the S&P 500 index as its primary investment medium. Our methodology is technical and statistical in nature; however, consideration is given to the overall fundamental condition of both domestic and global markets. The strategy avoids forecasting specific market direction, but rather takes both sides of the market and derives profits as a function of Theta, the “time decay” component of options, and of volatility, which has a constant effect on the value of the option. In the Aggressive Program, the short options will typically not be hedged. Although there is no guarantee that a particular account will experience any profits, VCM seeks to maximize returns, while balancing risk, to target an annualized return objective of 20% to 30% and greater.

Risk Management

Risk Management:The greatest risk entailed with the Aggressive Program and Moderate Program trading strategies occurs during periods of extreme S&P 500 Index volatility, specifically periods with large one directional movement. Due to the probability that major/sudden downside movements of 20% or more in the S&P 500 Index is far greater than sudden 20% upward movements, the trading strategies employed by VCM are more cautious regarding major downward movements in contrast to upward movements in the S&P 500 Index. In addition, the Moderate Fund strategy adds hedging to reduce risk.Approach to Risk:The following statement is the opinion of VCM:VCM takes a statistical approach to trading. With the increased frequency of market corrections over the past three decades, investors are realizing that 3 standard deviation events are occurring with greater frequency than initially estimated. Consequently, market implosions are not as rare as some models would imply. While implosions are not predictable, trading models fail when they do not appropriately account for such events transpiring. Model breakdowns arise when fat tail events occur while investors continue to expect mean reversion. A second reason for failure is a dependence on normal or Gaussian distribution (bell curve), which implies that there is less than a 0.3% probability of a tail event occurring. In other words, expecting mean reversion and the dependence on the bell curve causes risk models to underestimate the probability of extreme market moves. While we do believe in mean reversion, VCM acknowledges that the mean may shift before the reversion is completed. Therefore, we view controlling risk as the most critical component of positive performance.