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When to Risk a Lot for a Little
April 4, 2011 Attain Capital 0 comment Like
While we're not necessarily big believers in trades through which you risk a lot to make a little ($5,000 to make $500 for example); there are many believers in such strategies (Warren Buffet is one through the puts he sold in 2008 and his insurance units, which are in essence a big premium collection program). And we actually do believe there is a place for option strategies in sophisticated investor's portfolios (somewhere on the magnitude of 10% of your total alternative investment allocation), as witnessed by our recommendation of programs such as FCI, Cervino, and HB Capital.
Anyone considering option strategies needs to understand that you are risking a lot to make a little on each trade, and Kingsview Capital, a program we have had on our expanded watchlist for some time, does a great job of illustrating just how a certain option strategy they employ (iron condors) works in the following infographic:
[Source: Kingsview]
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.
Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.
Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.
Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.
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Trading futures, options on futures, retail off-exchange foreign currency transactions ("Forex"), investing in managed futures and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. You should not rely on any of the information herein as a substitute for the exercise of your own skill and judgment in making such a decision on the appropriateness of such investments. Any mention of 'funds' within this site encompasses both privately offered fund and separately managed account investments.
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client's commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA. Use the following links to view the full terms of use and risk disclaimer and our privacy policy.
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