We uses the Commodity Arbitrage Plus Program ((CAPP) to manage client accounts presently. The CAPP has two sets of strategies, the Commodity Arbitrage Strategy (CAS) and the Macro Trading Strategy (MTS). The CAS trades commodity calendar spread futures while the MTS trades with the stock index futures.
The Commodity Arbitrage Strategy (CAS) grew out of Dr. Wang’s proprietary trading experience since September 2003. The program uses statistical methods as well as the trader’s experience to identify trading opportunities in commodity calendar spread markets. Calendar spreads are pairs of future contracts of same commodity but with different futures expirations. An example of a calendar spread for WTI crude oil would be long December 2018 WTI crude oil while at the same time short November 2018 WTI crude oil contract. In general we do not trade the directional underlying commodity market unless we have strong signals with conservative risk limits.
Commodities such as crude oil, heating oil, wheat, live cattle, gold and copper, play important roles in economy and in our daily lives. There are many market participants such as commodity producers, hedgers, money managers as well as short term speculators. Market activities are aggregation of different participants with different motivations, risk levels, and trading horizons. Due to the aggregation of the activities, there can be directional bias or mean reversion for some calendar spreads. We use statistical analysis combined with the specific market knowledge discern the type of market conditions and trade accordingly. PINT trades futures contracts in several sectors: the energy sector in Natural Gas, Crude Oil, Gasoline, and Heating Oil; the livestock sector in Live Cattle, Lean Hogs and Feeder Cattle; and the grain sector in Wheat, Soybeans and Corn.
The Macro Trading Strategy (MTS) grew out of Dr. Wang’s investment experiences. So far we long only the stock index futures but try to avoid relatively large stock market dips such as bear markets in which the major stock index S&P 500 declines over 20%. In the future we may enter into either long or short positions depending on prevailing market conditions.