Risk of Losing More than Investment with a CTA?

[vulture]

Quote from JayS:

I remember one that lost more than was put up (for some of the investors) back in the late 90's, I think they were selling NG calls when it went to $9-$10 overnight. Something like selling $100 calls way otm near expiration that went to like $5000 the next day.

Actually, there is a similar type of pure commodity fund listed on IASG that has a similar type of volatility of returns. I think the fund had a drawdown of 65% in the first 3-4 months of this year and then had a couple of bang out months. Its hard for me to believe that these guys will leverage up that much in a market that can become extremely illiquid and inaccessible at times.

 

[mtzianos]

Quote from 5yrtrader:

I think you mean MAR not MER, and the sharpe ratio is the typical measurement for how leveraged a fund is. With notional funding there is a risk of losing your more than your whole investment even if you are a LLC.

I think he meant MER (Margin/Equity Ratio).

MAR = CAGR / MaxDD

 

[5yrtrader]

Quote from mschey:

Dumb move IMO.....why would a futures trader give up the tax benefits associated with trading that instrument?

You still get the tax break

 

[Corso482]

Quote from 5yrtrader:

With notional funding there is a risk of losing your more than your whole investment even if you are a LLC.

Yes, but can they actually collect from your personal assets? How can they get at your personal assets if you are incorporated?