Managing Funds for a Living

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Quote from paysense:

You see the high-yielding covered call picks that contain outstanding fundamentals and technicals need to be managed against a very knowledgeable understanding of market technicals or you won't even beat the S&P 500.

We contrast our fund most-closely with the Nasdaq and since we are cashed out of our long positions and now that the top leaders are suspect we fully-expect this market to get taken down about 15%. This will bring our YTD return (about 0%) in line with our market-beating average of about 25% - once we again leverage off the TRUE market bottom and the typical easy gains thereafter.

As I say time and again, this is the only low risk proposition or method that I know that can AVERAGE 50%+ per year - which of course you don't want to NOT know what you are doing and have a 25-45% decline once you've ramped up to say 2M from 200k over a bull stretch.

At C2 if you read my system description, covered calls are NOT the only method we profit from. In fact the best gains are being made now that the correction is intensifying. Take note that last week I entered some bearish plays that went (temporarily) against me with the ramp up Friday and in the pre-market into the open Monday that gave a significant intraday drawdown as I am using ES and NQ futures. These gains (losses) were short-lived and new lows from the indexes were quickly made.
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You appear to have given up on your conservative options plays and are swinging for the fences now. Huge 40% drawdowns aren't going to make your system look any better - are you losing your patience?

Trades 373
Profitable 149
Losses 224
Win % 39.9%

Cumu $ ($30,502)
after typical commission ($51,438)

Sharpe Ratio -0.591
Max Drawdown 40.06% (20071126 to 20071128)
 
In short, yes.

I know what I can do with Covered Call Funds and with short index option sells, etc.

I also understand Market Direction well enough to navigate successfully going forward.

I did a backtest study on the "what if" scenario of using ES/NQ/YM etc. with a medium level of leverage along with the recent 6 month market direction calls - and guess what?

Very low maintenance with respect to fund management and returns consistent with about 200% per year in up and down markets!

I wasn't going to reveal this and was going to embed a lower margin amount within my Covered Call Fund at C2 - yet the recent market action ejected me right out of my seat :confused:

Not sure what to do going forward.

A couple of days ago the market went a bit high putting these short (ES/NQ) positions (that I felt were a bit over-allocated - 10-15 contracts - since they were disrupting my hard-fought work these past six months) into a new drawdown (was ~23.5% now ~25%) but that was with the wacky moves the market was making between 3pm and 9am).

In fact I had initially gave up ~7k (the position you see with my closed trades) with a late-afternoon ramp/simulated margin call I misses - and subsequent sell at highs of position. My work the next morning (which by then of course these lofty prices came back down) recouped about 5k.

Anyway that ~25% drawdown was then recouped and with the markets breaching new lows and Fed-speak <i>seemingly</i> consistent, I felt no need to reduce a 15 contract holding down to 6-8 or to hedge with WOTM call purchases since the Fund was (temporarily) at new highs or 116k and likely to become very profitable since this correction hasn't/hadn't even seemed close to (yet) putting in a bottom.

==then (similar to the "surprise" Fed discount rate-cut that robbed me) we get this in the pre-market:

(from C2 journal)
The Fed got me and got me good: U.S. interest-rate policy must be 'nimble,' says Fed's Kohn
...helping U.S. stocks to surge for second day amid hopes of another rate cut.==

Hence the "swing for the fences" since I walked away from the computer and entirely expect favorable prices to once again avail themselves. Will I hedge and reduce exposure until 20-40k in gains are secured, you bet.

At this point it is conceivable the market may not come down a bit from these levels again and most of this account wiped out.

Should I now buy insurance calls? Or just let the likely temporal drawdown contract? A bit disconcerting to say the least since I'm quite certain this strategy shift will benefit immensely.

Which is why my inclination at this juncture in uncertain. What, tell me, do I do now? Since as we speak the indexes already up 1.5, then 2.5 and now 3.5% - are going up <i>the day after a new rally started just yesterday</i> (VERY SUSPECT)!!

In fact the only "index" that has "held up" to pull this market out of the "correction" is the Nasdaq 100 - not a really healthy scenario.

So GOOG BIDU RIMM MA and AAPL do pull us up out of what was going to be a "normal" correction to delay further delay the inevitable and decimate my account in the process??

Well if "the market" is bent on having its Santa Claus rally far be it for me to get in the way!

What am I to do?!?!

Sticking to my principles may very well play out - but with an initial 40-50% DD to C2 Fund. This can be entirely avoided in the future - but perhaps this circumstance will be over-looked by prospects. At least I have no subs now.

paysense

thx for noticing
 
OK I made the adjustments - I now have a 55k account at C2 with the following positions:

c2112807.jpg


In the future I will diversify more between "e-mini" instruments and correlate more closely with hedging instruments.

For now we are SHORT as our Market Direction call is "Stop Losses".

In the event we move to "Green Light" we will go long and profit accordingly.

If I had been doing this from the gate, my fund would be a smooth curve up at about 200k from 100k in 6 months with the huge possibility of going to 400k in the next six months regardless of market direction.

My worst-case scenario for this strategy to not play out (aside from what the market through at me - not having my hedges in place) is for the market to toggle violently back and forth in a wide range and never go anywhere but sideways.

To avoid THAT scenario, I will gradually build up account so it - for sure - has cushion and then when back into "normal mode" or a staunch up or down trend use medium leverage.

When market gets to my "Caution" mode, I can pare back until it resolves itself oneway or another - and of course do as I am now with insurance options in place.

YYYYYYIIIIKKKKKEEEEESSSSSS!!!!!! So the Fed impeded the progress of my CC Fund - that did find its footing, eventually and now within a couple of hours of not having my hedges in place it nearly wiped this one out with the markets interpretation of "Kohn-speak".

So you don't think we will still correct and take down GOOG, etc?

So you think a quarter-point here and a quarter-point there is going to save the market from a "normal" correction. In short, NO!

So in a short while we should see substantial progress.

Pay$S

Paysense
 
Close,
BULLETIN >> BLUE CHIPS IN PHOTO FINISH FOR BEST DAY OF 2007, RISING MORE THAN 330 POINTS
Phew! what a day. Nasdaq Closes With Second-Highest One-Day Gain Of '07: 3.2%, S&P 500: 2.9%
This isn't the first huge gain seen in this correction. The Nasdaq swelled 3.5% on Nov. 13. That day, the S&P 500 added 2.9%.
The market's two-day surge has added 4.8% to the Nasdaq and 4.4% for the S&P 500.

Please note that the volatility indexes [VIX/VXN/VXD] also are nowhere near what would be considered a bottom to the correction.

pay$
 
Check that -

Data came in late in the day...as of Wednesday, 28-Nov-2007, we are back in "Green Light" mode.

No guarantees of course which is also part of the reason we will phase into long positions.

50K account

Originally started today short (1) ea. YM, NQ, ES.

I was over-allocated so cut (1) short YM contract and after Bernanke I cut (1) short ES contract that left (1) short NQ contract.

With all the recent data now in:

We are now long (1) NQ contract (reversed) and added (1) long ES contract and will see where this "new rally" takes us.

paySen$e aka Gilbert
 
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