W.G. Wealth Guardian Ltd. : Gamma Volatility Ratio Program (GVRP)

Summary

The Gamma Volatility Ratio Program (GVRP) is a market neutral trading strategy that seeks to generate returns by employing momentum and spread arbitrage methodologies in specific market volatility instruments. The strategy has been formalized into an automated system, thereby eliminating human intervention and ensuring unencumbered operation. The system attempts to produce consistent returns in varying market volatility environments that have little or no correlation to traditional and alternative strategies alike. This makes it a valuable component of any multi-asset class portfolio as it can greatly reduce overall volatility. The strategy was developed by investment professionals by utilizing the expertise and knowledge gained through years of trading and market observation.

Investment Strategy

In normal to low volatility environments, GVRP excels in taking advantage of sideways or rangebound markets to generate consistent income. At the same time, the strategy is inherently long gamma and has the capability to capture increasing returns during market turmoil and selloffs. The strategy seeks to exploit pricing inefficiencies across markets and time horizons by arbitraging cash and forward markets as discrepancies appear. This means that the strategy may hold positions for sustained periods even during extended market declines. It may also be flat when opportunities are limited or risk is under-priced. The methodology is conceptually driven and based on quantitative analysis of statistical information but also includes market psychology/ sentiment indicators. The analysis attempts to identify different phases in the market cycle and acts accordingly - taking various spread positions or being in cash. Therefore, the strategy can potentially profit in many different types of market environments – be it market lulls, rallies or sharp declines. GVRP can provide excellent diversification and hedging potential, not only having very low correlation to traditional investments such as stocks and bonds but also to the alternative investment world.

Risk Management

The strategy was conceived conceptually (as opposed to data mining) with risk management at is heart. The means that risk management is inherent in the selection and execution of trades rather than placing limits that disregard the current character of the market. Traditional markets and strategies are typically vulnerable to shocks while most strategies classed as alternative are vulnerable to periods of sideways / range-bound movement. This strategy attempts to outperform in exactly such situations. By maintaining a market neutral approach as well as taking advantage of gamma convexity, it is preemptively protected against sharp market downturns. At the same time it reaps returns during periods of low volatility and sideways movement.