agip wrote:
Just looking at the CSFB hedge fund indices and thinking about Coach D's claim of being up 40% - Their managed futures category is among the worst - down 3.15% year to date. Isn't managed futures pretty much what D is doing? Just following trends on commodities? Can't say I understand the strategy very well, but why is D up 40% and the professionals down 3%? Weird.
For the record, their all-strategy hedge fund index is flat for the year.
For the record, the top account in Barclay's CTA index for medals traders in 2014 was up 55% and the top account for systematic traders was +122%. I do not understand why every hedge fund allowed to do so isn't doing exactly the same thing I'm doing, but they don't seem to be.
The strategy is very simple: I am aggressively long deflation, and I am doing this strategy by going short industrial commodities, in my case: oil, lumber, copper, gold, platinum, and palladium, and I am totally short all of them. I started this before the correction, which was fairly easy to predict as about 75% of the S&P was above the 200 day moving average, which is short-term overbought (this means a correction, not necessarily a bear market). But over the last month, as more and more commodity prices have collapsed, I have been building a large short position by going short more and more commodities. I am short 2-3 times the equities and equity indices I am long, so this is not a hedge. I am market neutral (long-short) and trying to make a profit on both sides.
As for how this works, consider the relative price of copper:
7/29/2015 close: 2.4019 (this is the December futures contract price, not cash price)
11/18/2015 (December future) close: 2.0635
price gain: $0.3384 per pound per contract
contract size: 25,000 pounds
profit per contract: $8460.00.
In a $1 million account template, 10 contracts for each of all 6 commodities have open profits of $421,005 with a initial margin deposit of about $205,000 as of the close today.
You CAN do this somewhat with ETFs (not every commodity). The Proshares 200% short gold GLL is up 22% in the last 30 days, and there are several short commodity ETFs up 20-30% YTD.