Fully automated futures trading

[Napoleon@Dynamite]

Are you prepared to top up your capital for 3 consecutive years (2005-2007)? As per your earlier post, you would have to increase your capital to $130k at the start of each year.

Great point H2O, I hadn't given that much thought. If those three years suddenly repeat themselves, I will have to move about 35k each year from my long-only etf acccount into my futures account, thus significantly tilting my exposure towards managed futures. That would be a tough pill to swallow.

 

[truetype]

Great point H2O, I hadn't given that much thought. If those three years suddenly repeat themselves, I will have to move about 35k each year from my long-only etf acccount into my futures account, thus significantly tilting my exposure towards managed futures. That would be a tough pill to swallow.

If you need to have 'offsite' capital in order to be confident you can keep the account funded, you aren't really trading at 30 vol. You should calculate your vol on the full capital commitment, including the offsite money.

Trendfollowing at 30 vol is nuts anyway. You can assume a drawdown of 1- 2× your vol target at some point, and a loss of 30- 60% will cripple you. When you lose 50%, you need to make 100% to get back to even.

I've posted before: the prospective Sharpe of trendfollowing, ½- ¾ at best, isn't enough to support heavy leverage.

 

[Napoleon@Dynamite]

If you need to have 'offsite' capital in order to be confident you can keep the account funded, you aren't really trading at 30 vol. You should calculate your vol on the full capital commitment, including the offsite money.

Trendfollowing at 30 vol is nuts anyway. You can assume a drawdown of 1- 2× your vol target at some point, and a loss of 30- 60% will cripple you. When you lose 50%, you need to make 100% to get back to even.

I've posted before: the prospective Sharpe of trendfollowing, ½- ¾ at best, isn't enough to support heavy leverage.

Interesting, truetype. So, if I have 130K in an SP500 ETF and 130K in my managed futures system, and I am willing to top off my managed futures with capital from my ETF, whenever necessary, then maybe running my futures account with this type of volatility is not problematic?

 

[truetype]

My point is, then you're really running at 15 vol, because your denominator is 130+130.

 

[Napoleon@Dynamite]

You can't look at VIX as a normal futures market. It does not matter that the biggest 1 day rise in history was X%, you should be comfortable with VIX rising maybe 50 to 100% more than it ever has before. Basically you need to ensure that it's virtually impossible for the market to wipe you out. As it is, it's quite easy to imagine fairly plausible scenarios where your account loses 50%++ by large but not catastrophic geopolitical events.

Quiet1, what is the proper way to trade VIX, in your opinion? Are you saying that it doesn't belong in a slow-moving trend-following/carry system that trades once a day? Or are you saying that the exposure should just be tuned way down.

 

[Elder]

Sorry to butt in on this group intervention, but @napolean@Dynamite didn't GAT answer your question earlier with his witty Livermore quote. I will butt out now.

 

[Quiet1]

Yes I think GAT answered that one. It's certainly got great carry on the short side but that carry can only be earned safely with low leverage especially if you're not intending to watch the market 24h a day. I like GATs method of handicapping the score by 10 for example.

Fwiw, my preferred way to trade VX futs when I do is via non-nearby fut spreads. Not currently in any.

 

[Napoleon@Dynamite]

Yes I think GAT answered that one. It's certainly got great carry on the short side but that carry can only be earned safely with low leverage especially if you're not intending to watch the market 24h a day. I like GATs method of handicapping the score by 10 for example.

Fwiw, my preferred way to trade VX futs when I do is via non-nearby fut spreads. Not currently in any.

Thanks for all the feedback. For now, I am going to take VX out of my instrument universe, until I understand it better.

 

[megab]

From the man.com website.

GAT

So looks to me like 2014 is going from 100 to 130. So thats 30% roughly, how do you get to 100% ? is it just scaled by volatility 2,5 to get annual volatility target of 25%, and them perhaps performance fee added?

 

[traider]

So looks to me like 2014 is going from 100 to 130. So thats 30% roughly, how do you get to 100% ? is it just scaled by volatility 2,5 to get annual volatility target of 25%, and them perhaps performance fee added?

There was a period of time when he was running higher vol (50%) i think. If you read through all the posts here and on his blog you will find it. He subsequently lowered it.