The Capital Appreciation Program: Spreads ‐ A Unique Approach to the Energy Sector

Corporate Summary

Tyche Capital Advisors, LLC is a New York based registered commodity trading advisor currently offering trading programs to qualified investors. Through its trading programs, TCA will engage in speculative trading of futures and options contracts offered on the United States commodity exchanges and overseas futures exchanges. Tariq Zahir and Steve Marino are the firm’s owners and principals.

Mission Statement

As an investor, you need an investment management firm that understands your needs – a partner with a solid reputation and documented results. At Tyche Capital Advisors, our mission is to find and manage financially rewarding alternative investment strategies in the exchange traded futures markets for those accredited investors who want to grow their financial wealth, manage risk and successfully achieve their financials goals.

We fulfill this mission through our guiding values. This means being active in the way our industry evolves and continually striving to provide unmatched services to our clients. It also means educating our clients; making the complex financial situation easy to understand. Every activity and contract we undertake is handled with the highest standards of professionalism. Given the nature of our business, this value is vital. We manage our business with an intense focus on producing work and materials of the highest quality and value. Professional, quality work also requires that materials are concise, clear and organized so as to ensure close attention to detail. As a professional money management business, we have a responsibility to ensure that all matters on behalf of the services we provide are handled in a timely and equitable manner. Our main goal at Tyche Capital Advisors is the Relentless Pursuit of Excellence. This embodies all of the other principles and much more. It means continually striving to improve our company and our clients.

Capital Appreciation Program

TCA recognizes the crude oil and refined energies futures market as one of the most vital commodity markets for the world economy driven by a multitude of interdependent factors. We maintain the philosophy that trading the spreading opportunities available in the forward curve of crude oil and distillates provides a unique investment and trading strategy. This coupled with a clear set of strictly adhered to risk management methodologies designed to manage portfolio risk exposure, make up a robust asset management model that effectively trades the liquid global crude oil and energy markets.

The Capital Appreciation Program is a portfolio management and trading platform that systematically trades the forward curve of crude oil via a collection of proprietary quantitative and analytical computer software algorithms coupled with fundamental discretion. The program’s curve analysis module continually evaluates and monitors the crude oil forward and back curve’s past, present, and projected slope, probability of change, and direction based on a number of proprietary algorithms and statistical analysis techniques. This analysis and predictability is critical to the success of this trading strategy and provides the guidance to analyze and project the path, performance, and strength of the movement of the spreads created by this curve. It also provides vital indicators which attempt to anticipate changes to the curve and therefore allow the trading strategy to take advantage of these changes through position and equity allocation methodologies.

 Inside The Capital Appreciation Program

The program is comprised of several core modules that handle various aspects of the trading and management of assets allocated to the strategy including:

  1. a trading signal module which triggers position entries and exits,
  2. a position management module that handles position stops and trails that systematically manages profit/loss targets and thresholds,
  3. a margin to equity ratio module which maintain appropriate account equity exposure and position leverage scenarios, and
  4. a risk management module that incorporates several multilevel equity risk algorithms designed to manage portfolio risk while capturing profitable trades.

These modules continually work in conjunction with one another to form a systematic end-to-end asset management platform.

  • Trades signals are generated daily, however trade executions typically only occur a few times a week, it is not uncommon for an entry and exit in the same position to occur intraday depending upon market volatility. With that said, there are times when trade signal signals may not be executed for several days or weeks also due to market movements and volatility.
  • Positions are typically held anywhere from 2-3 days up to and sometimes in excess of several weeks or months depending on position, portfolio goals, and market volatility.
  • Typically uses 5% to 9% of margin to equity ratio and, very rarely, no more than 15% which we find is a level and fits our conservative portfolio risk exposure methodology.
  • As the model is trading the forward curve it is not uncommon to have multiple positions concurrently along the curve either as a, stand-alone, complementary, or offsetting positions.

Risk Management

Tyche Capital Advisors uses a pro-active management style of monitoring and managing investments in relation to risk, return, capital requirements, and market directions. Policies are in place to adjust positions as needed. TCA uses conservative margin to equity money management strategy that is designed to keep leverage at levels which attempt to avoid extreme portfolio volatility.

The Capital Appreciation Program places a huge emphasis on effective portfolio risk management to reduce exposure through effective management of leverage via appropriate margin to equity ratios. While the futures market incorporates highly leveraged products, the model only uses a small percentage of this leverage, typically 5-9%. This allows for positions to capture conservative profits, while monitoring drawdowns and manage overall portfolio risk. Portfolios are managed with a proprietary margin to equity ratio methodology and systematic algorithms which provides a structural framework to monitor and manage portfolio exposure through continued position monitoring and scaling. In addition, portfolio risk exposure is managed at various times through position diversification, vertical spreading strategies, and inter and intra commodity positions as those opportunities present themselves. Multilevel Portfolio risk management algorithms constantly monitor position draw downs on a position by position basis. We find this controlled and conscious approach to managing position profits and losses, as well as, portfolio exposure provides a methodology that is unique to trading the highly volatile energy markets through spreads.