Category: Commodity Trading Advisor

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Commodity Trading Advisor CTA Managed Futures

Goldman Management – CTA performance commentary June 2014

In the first three weeks of May the S&P’s trading range was extremely compressed at roughly 1% with the previous 13 weeks having been limited to a 5% range, representing a measure of suppressed volatility that has not been seen in 8 years. In addition, numerous volatility measures also moved to the lowest levels in years, as is the case with VIX, which fell below 11 last month, the lowest since February 2007. Entering the month of June the S&P broke above this narrow range and advanced in the first three weeks despite the turmoil in Iraq. The S&P has rallied in the last two months without a single daily gain or loss +/- 1%, a rarity as well, with a prior occurrence in 1995. Furthermore, the S&P finished in the top 25% of the daily trading range (the S&P point change from the previous day/ the S&P daily range) in the first 20 trading days of the month, which is an unusual occurrence, having been seen less than a dozen times in the past 55 years. This trend continued into month end, driving the 40 day average of the formula into the top 31% of the daily range. This has occurred just one other time going back 55 years, having last manifested in the middle of May, 1995. The present backdrop is different than in May 1995 as the S&P then traded sideways the previous year and experienced a 10% correction induced by the Federal Reserve raising rates.

Agriculture Commodity Trading Advisor CTA Grains

USDA Agriculture Grain Stock Report Analysis

Early 20th century British economist John Keynes famously stated “the market can remain irrational longer than you can stay solvent.” Lately, the agricultural markets have been defying logic and testing the solvency of many. A variety of market forces have been driving the meat and grain markets. With some key USDA reports closing up the first half of the trading year, the markets are celebrating the upcoming holiday with some fireworks of their own.

Commodity Trading Advisor Managed Futures

IASG CTA Rankings

Most CTAs are good at one thing trading. In order for them to efficiently run a business and get themselves off the ground all other aspects of their business are important cogs to the wheel. We have written before about vertical badge_proofthe items (other than trading) a CTA must be able to excel at for long term success. Marketing is one of these keys every CTA must do to get investors interested in their program. Simply listing on databases and talking to a few industry people just is not enough to get real growth to occur. Of course having good performance and decent assets to start does not hurt things, building a brand and marketing it to asset allocators is essential. Other databases have long provided CTAs with marketing collateral. IASG offers free use of its downloadable PDF forms for CTAs to use for prospective investors. Accessing these directly from their manager pages.

Commodity Trading Advisor Managed Futures

Luck vs. Skill in Investment Performance: Separating the Two

Luckily (or should we say skillfully), there is a scientific way to approach the problem. We can consider a game of chance with some known degree of ‘inherent skill’. For instance imagine a trader who has a 50% chance of winning each trade he takes. Suppose the trader makes twice as much on his winning trades than he loses on his losing trades. This is equivalent to being paid 2 to 1 on a fair coin flip. The long run expected outcome of each trade is $0.501. This $0.50 expectancy is the ‘inherent skill’ of the trader. But an outside observer does not have this knowledge. The outside observer only has the trader’s track record and must use it to somehow decipher the trader’s abilities. So how is this best accomplished?

Commodity Trading Advisor

Third Annual Managed Futures Pinnacle Awards

Last night was the 3rd annual Managed Futures Pinnacle Awards hosted by CME Group and Barclay Hedge. The event was supported by many of the industry brokerage firms and service providers that help comprise the Managed Futures space. The event was exceptional in our opinion as we were able to rub shoulders with industry peers and some of the brightest minds in our industry. We are happy to report that several of the award winners and nominees are managers we have introduced to IASG clients some of which include Esulep, Global Sigma, Four Seasons Commodities, Kottke Commodities, and Tlaloc Capital. Interestingly, we are one of the first allocators to many of the winners as our database keeps us in a great position to identify new talent for our client portfolios. Another benefit of attending this event allows us to uncover other great managers that we will try and learn more about for our clients and onboard into our database.

Agriculture Commodity Trading Advisor CTA Grains Managed Futures

Kottke : A World Hungry For Meat

After three consecutive quarters of much-greater-than-expected demand for U.S. corn and soybeans, confounding every analyst’s projections and strengthening current-year prices sharply, a turn to excellent planting and growing weather in Northern Hemisphere abruptly collapsed forward prices for corn, wheat, and to a lesser extent soybeans. We confess bewilderment as to why, with world demand this year so vastly larger than expected, forward price should not be well-supported by demand continuing on this surprisingly steep trajectory.

Commodity Trading Advisor CTA Managed Futures

Goldman Management – CTA performance commentary

One of the biggest surprises this year has been the sharp decline in long term interest rates despite the Federal Reserve’s monthly removal of $10 billion in bond purchases to gradually reduce quantitative easing. Numerous market commentators have put forth explanations for the rate decline, touching on short covering, limited supply, economic woes, weather etc. A factor which has only been partly discussed is the correlation between European rates and US rates, especially the link between the German Bund and the US 10- year Treasury. These two have been loosely tethered to one another for more than 25 years. In the last sovereign debt crisis during the summer of 2012 Italian and Spanish long term rates stood at 7%, and have since dramatically declined, ending last year yielding 4.1%.

Agriculture Commodity Trading Advisor CTA Grains Managed Futures

Rosetta Capital – Conventional Wisdom

At the turn of the year the “consensus” was that corn was going lower, Bond prices were going lower (yields Higher) and the meats were going irregularly higher. Five + months into 2014, the bonds have rallied over 10 points and the funds have gone from being short 230,000 contracts of corn to being long 340,000+ contracts as of the beginning of May It took them over a dollar in price rally to get there but here we are! Now they are long, I think at an interim or possible top of the price action? Subsequent action since the May 9th report only reinforces my perception of that. What lies ahead is a chasm of time and future price discovery.

Commodities Commodity Trading Advisor CTA Managed Futures

David Martin Finds Soft Commodities a ‘Last Century’ Challenge

David Stephen Martin deals in commodities that people have a hard time doing without. Take that cup of fine Colombian coffee you just drank. Or that chocolate bar. Or that soothing glass of orange juice. Martin trades the soft commodities — coffee, cocoa, sugar, orange juice and cotton. And he has fun doing it, even though these commodities are some of the most volatile products: vulnerable to frost, drought, disease, insects, animals, guerrilla wars and occasionally unstable governments. They are grown and traded all over the world.

Agriculture Commodities Commodity Trading Advisor Grains Managed Futures Volatility

Managed Futures – Futures Trends

We know it is early as CTAs are still computing their monthly returns for May. With some early reports and our own proprietary tool Insight, we are seeing gains of >1% for the month of May. With continued downtrend in VIX (at or below 14) many managers trading indexes have been steady but under performing the overall broader S&P 500 index. Whereas managers trading commodities, such as coffee, cocoa, corn, soybeans, wheat, crude…just to name a few have seen a completely different story. Our interpretation is we will see a continued trend in volatility with respect to commodities and continued uptrend in equity indexes (past performance not indicative of future results). That being said, this upward trend in the indexes is going to pull back one of these days. The duration and extent are anyone’s guess. Now is the time to be more aware of “too much of a good thing”. The strength of this bull market for indexes has lasted quite some time.

Commodity Trading Advisor

Check National Futures Association for a Report Card

Lets face it, trading futures is challenging. Both experienced participants and novices need all the knowledge possible to succeed. One of the more important aspects of trading futures or any financial instruments is to know with whom you are dealing. Trying to get all the information needed can be overwhelming to a new trader and almost as harrowing to an experienced trader. There is one extremely helpful place to start — the National Futures Association (NFA).

Commodity Trading Advisor

Four Key Items for an Emerging Manager to Grow Their Business

Over the years of meeting emerging managers I’ve found a common theme among them. They often believe when they start a money management firm, investors will automatically find them and invest. In other words, it is the “I build it and they will come” perspective. The new managers often miss the point; they started a small business. With any business, there are many components to handle including marketing / business development, technology, hiring employees, vendors, compliance and operations. Similar to most businesses, marketing / business development is often the key to grow or slow the business. In this article we discuss several points related to marketing / business development.

Agriculture Commodity Trading Advisor Grains Managed Futures

CTA: Kottke Commodities Grain Market Commentary

Slightly negative results for the month extend a run of near-flat returns as most of the main economic themes identified by the managers showed little reaction. The position in which we had substantially expanded our risk and volume was held as long as possible, until late on “last position day” prior to physical delivery, and still did not bear fruit. Our policy is to not hold overnight positions during the delivery period so as not to expose investors to large, albeit temporary, margin calls.Our “bullspread” strategy in corn – i.e., long nearby and short deferred – was based on projection that U.S. producers would tend to market supply slowly since they had already taken much income from selling soybeans and would wait rather than liquidate all 2013-14 production within a narrow timeframe. Our forecast of demand for U.S. corn was aggressive, as Argentine farmers held back supply for financial reasons and Brazil deemphasized exports to make sure it met soybean commitments.

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