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Red Rock Capital – Sortino: A ‘Sharper’ Ratio

Many traders and investment managers have the desire to measure and compare CTA managers and / or trading systems. We believe risk-adjusted returns are one of the most important measures to consider since, given the inherent / free leverage of the futures markets, more return can always be earned by taking more risk. The most popular measure of risk-adjusted performance is the Sharpe ratio. While the Sharpe ratio is definitely the most widely used, it is not without its issues and limitations. We believe the Sortino ratio improves on the Sharpe ratio in a few areas. The purpose of this article, however, is not necessarily to extol the virtues of the Sortino ratio, but rather to review its definition and present how to properly calculate it since we have often seen its calculation done incorrectly.

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.

Managed Futures

CTA Commentary: Goldman Management Stock Index Futures Program

The two years of persistent market gains in a low volatility environment may have fueled speculative excesses “the likes of which have not been seen since the last bull market”. In the first day of trading in 2013 the NASDAQ Composite moved above its 100 day moving average and steadfastly remained above this average until April 4th the following year. The time span above this moving average was more than 15 months, a feat for the record books, going all the way back to the inception of the NASDAQ Composite in 1971. This is 4 months longer than the previous record. The second longest streak lasted 11 months, ending July 1983 nearly one year after the bull market began in August 1982. Measures of speculation were rampant in both these tops. For instance in the most recent period, discount brokerage firms’ transactions in February was the highest in over 10 years and 400% higher than in February 2009, which was near the bear market lows. The NASDAQ Composite in the month lost 2% and is 5.5% off the early March closing highs.

Agriculture Commodity Trading Advisor CTA Grains Managed Futures

IASG April CTA Indexes

We are a little over half way through May and have approximately two-thirds of our CTAs updated through the month of April. Overall the index is flat and carried by agriculture and equity index manager trading for the month. Trend Following is so far posting a negative month with 73% of managers reporting. So overall on the year we are off to a moderate start as we get deeper into the second quarter. Without any significant trends we expect to see much of the same as the equity markets continue on the bull run. Agriculture should be particularly interesting as we head into planting season and this pig virus continues to play itself out.

Commodity Trading Advisor CTA Managed Futures

Flyberry Capital: “Big Data” CTA new on IASG

“Flyberry Capital was founded in 2011 to deliver attractive risk-adjust returns, uncorrelated to most traditional and alternative investments, and unconditional to any single market or economic environment. The company relies heavily on research, using mathematics, “big data” and sentiment analysis techniques to develop proprietary trading models and strategies. Flyberry employs a quantitative trading program that opportunistically […]

Commodity Trading Advisor CTA

NFA ‘deluged’ with responses to capital adequacy rules

The NFA has received more than 100 comment letters over a request for comment on contentious capital adequacy rules for CPOs and CTAs. NFA members and the wider public were invited in January to comment on the concepts of imposing a capital requirement on CPOs and CTAs as well as other customer protection measures. NFA spokesman confirmed it received 115 comment letters, with the “overwhelming majority” coming from the CPO/CTA community. The measures have provoked strong reaction from the industry and representatives for CTAs and CPOs to the NFA board of directors hosted a virtual town hall meeting to discuss them. Typically, opinion is collated and submitted by trade bodies, who have also made their concerns clear.

Uncategorized

FOMC: Some Growth Seen; Not Much Else New

Investors and traders keep watching the Federal Reserve’s Open Market Committee for new signals on monetary policy but the curtains remain closely drawn. The statement issued by the FOMC Wednesday after its two-day meeting shed little light from the March 19 meeting. Other than the first paragraph, the statement was identical to the one released after the March meeting, said Sterling Smith, futures specialist and vice president for Commodity Research at the Citibank Institutional Client Group in Chicago.

Agriculture Commodity Trading Advisor CTA Grains Managed Futures Uncategorized

New Agriculture CTA: Demeter Capital Management LLC

Demeter Capital Management is a registered CTA with a Livestock and Grain Trading Futures and Options Program. The Livestock and Grain Trading Program attempts to generate profits through the Advisor’s discretionary selection of futures and options trades in agricultural markets. Trades are selected on the basis of fundamental analysis, which is concerned with any factor that would affect the supply and demand, and therefore the price, of a given instrument. The Advisor’s market analysis tends to focus on seasonal trends and year-to-year comparisons. The Advisor absorbs and interprets a wide range of research on a daily basis, employing its principals’s combined 40+ years of experience in agricultural futures markets.

Uncategorized

FOMC Meeting in Focus But No Big Changes Expected

Market players and analysts don’t expect a trumpet blast from the Federal Reserve Board’s Open Market Committee (FOMC) meeting on April 29-30, anticipating that there won’t be any major changes in monetary policy. The FOMC has been tapering its quantitative easing (QE) program in swatches of $10 billion and analysts expect another cut by that amount to about $45 billion in bond buying. Markets are not expected to react much to the FOMC actions unless there is something unexpected. Several analysts emphasized there is no press conference scheduled Wednesday after the statement is released at 2 p.m. EST, which indicates the FOMC won’t be doing any heavy lifting. Some analysts are looking ahead to the June FOMC meeting as the time the committee might be more forthcoming on monetary actions.

Agriculture Commodity Trading Advisor Grains

Grains week in Review – Bocken Trading

Quite a whippy week. Beans and wheat broke hard earlier in the week. Wheat broke on wetter forecasts and beans broke on all the distressed China cargos and import talk. Funds liquidated flat price beans and exited spreads. There was major unwinding going on. As the week wore on, there were more and more reports of wheat being ripped up (both HRW and SRW) as well as escalating tensions between Ukraine and Russia which provided support. Both US and Brazilian bean basis firmed, we continue to see positive bean and meal sales weeks, and crush margins remain strong – all providing support to old crop beans.

CTA Grains Managed Futures

Futures Trading: Why Utilizing a Professional Money Manager May Be a Better Approach

Futures trading is a fast-paced, exciting business that attracts confident and assertive men and women who are convinced they can make a fortune, or at least a good side income, in one of the many futures contracts on the market. Some make it; many don’t. The percentage of self-directed traders who fail is exceptionally high. […]

Commodities Commodity Trading Advisor CTA Managed Futures

New Softs CTA: Martin Fund Management LLC

Martin Fund Management (“the Fund Advisor”) is a Registered Commodity Trading Advisor (CTA) with a core focus on exchange-listed derivatives of global soft commodities (i.e. futures and futures options on coffee, cocoa, sugar, and cotton), using a Separately Managed Account (SMA) structure. The Fund Advisor seeks to generate outsized annual returns of 15%-20%, in excess of the S&P Goldman Sachs Commodity Index (S&P GSCI), employing short- to medium-term trading programs with low macro correlation and disciplined risk management. The Fund Advisor was founded by David Stephen Martin, who has over 22 years of commodity derivatives investment experience.

Agriculture Commodity Trading Advisor CTA Grains Managed Futures

Why call them Commodity Trading Advisors?

Commodity Trading Advisors, or CTAs, as they are commonly referred to have long been pigeon holed in the Managed Futures industry as professional money managers that trade commodities. Most people liken them to what they see in the movies. The reputation is that these are free wielding traders that have unlimited risk appetite in search of making a fortune. It may be true that speculative commodity traders that are depicted in the movies seek out returns that perhaps a novice or capital preserving investor would never be able to stomach, but most professional money managers trading in Managed Futures are seeking a risk/reward profile that appeal to a broader investing community.

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