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I'll deal with this in two parts. Firstly even if we assume the Sharpe Ratio is zero it's still worth making an allocation to a negatively correlated asset. Let's switch from CTA's to tail protect strategies. These probably do have SR of zero, but they have stronger negative correlation...

I think these margin changes are mostly driven by regulators. To run this kind of product at about a 25% vol should require margin usage of 50% even at the new elevated levels. That doesn't seem unreasonable. GAT

Say we had $10,000. If we put $5,000 into stocks and $5,000 into bonds then we'd be getting 15.2% * $5,000 = $760 of vol from stocks and 6.1% * $5,000 = $305. So the proportion of our risk coming from stocks is $706 / (760+305) = 71% and the proportion coming from bonds is 29%. This is...

No, although it wouldn't be a stupid thing to do. GAT

Someone with $100K shouldn't be full time trading, full stop. I thought I'd made that clear already. And, to reiterate: you can't consistently make 100% a year without taking insane risks unless you are an extraordinarily good trader (say in the top 0.0001% - since to expect to make profits in...

That isn't a recent assertion of the managed futures industry, as I've already said it's basic portfolio maths that has been around since the early 1950's. However as this theory has obviously passed you by let me show you an example. Suppose you have a classic 60:40 equity / bond portfolio...

:banghead: GAT

Er no the main point is that even if returns are low then it's still worth investing in uncorrelated strategies like CTA's, tail hedge and short biased equities. As for the point you make, you'd have to ask Ewan what he meant. It's his statement, and his fund. But if you want my opinion: a...

Leaving aside whether anyone should be day trading anything the main factor as to whether someone will be profitable day trading is cost; to be precise cost normalised by volatility. Bid/ask in BTC is about twenty times higher than ES futures; vol is about four times higher, so BTC is about five...

The returns shown are after fees. Relatively slow trading strategies with positive skew properties, and with an expected SR of say 0.5, will always have long periods of low performance - that's just basic statistics. And basic portfolio maths says that if an investment has a negative...

Sorry, I really don't buy the argument that there are limited capacity strategies that only small traders can use. Any given high frequency strategy has limited capacity, but big HFT shops diversify across thousands of instruments, making it economic for them to use that strategy. Yes, small cap...

Give me an example. GAT

Sorry, no. Apologies for any misunderstanding. GAT

Sorry Bob - I don't trade outside money (and I have no intention of doing so) But you are welcome to peruse https://www.systematicmoney.org/ GAT

Main benefit of CTA type strategies is the diversification benefit particularly in tail events (so Sharpe Ratio is a poor measure as it's symmetric, and any kind of CAPM type analysis isn't much better as it assumes linear correlations). There are numerous studies explaining this. Basically you...

Sign - another ET trope: small traders can make more money than large ones. In fact the world is not full of successful retail traders making consistent double digit returns every year. GAT

You're right however since Sharpe Ratio is an excess return over the risk free rate, if you assume risk free rate ~ inflation, you're close enough. But yes, to be safe add another 3% on for inflation. GAT

I've posted on this subject before but here are some more realistic numbers: Assume you can make a Sharpe Ratio of 0.5. Maybe you'll do better - bravo. Maybe you'll do worse (most retail traders lose money, so 0.5 would be much better than average). That implies a full Kelly risk of 50%, and...

:-) Only on an internet forum would assuming a consistent return of 25% plus a year be described as "conservative"... GAT

Thanks, just ordered this book to add to the schadenfreude section of my library. GAT