|Strategies > Introduction
At present, we prefer thirteen strategies that best meet our criteria for an effective balance of growth and risk. Four of the strategies use S&P 500 index futures options as the focus, or as a major focus. The fifth strategy uses the Nasdaq 100 index futures. A sixth strategy uses options on the S&P 500 index futures, but with a risk limiting feature using credit spreads. Two strategies use futures and options on stock indices as well as commodities. They aim to further capitalize on market opportunities by applying different trading techniques to each of the three major stages of market activity, i.e., trends, counter-trends and consolidations. The newest strategies have as a goal to respond to developing trends and new patterns in investing and markets through use of commodities through futures and options. The strategies and market vehicles were chosen after careful consideration of past, current, and possible future market environments with a goal of developing strategies that would have growth potential in such. Past performance is not necessarily indicative of future results.
In designing strategic allocations, we believe that every portfolio worthy of the name deserves a growth component. Our clients who agree with that sentiment find at least two justifications that support it. Those with long memories have a prudent concern to include an inflation estimate in planning their investment allocations. Secondly, larger numbers of them are finding that their heirs, with increasing financial sophistication, are suggesting they allocate more to growth.
When we say "growth" we are referring to strategies that have the ability to consistently and significantly outperform not only inflation, but the major stock indices. We know very well, of course, that reaching for higher growth takes on the corollary of engaging higher risk. So, in our basic strategic planning we accept the challenge of avoiding substantial draw-downs, staying alert to money management and constantly searching for opportunities of the moment that can add to additional growth. We also believe a critical element in our trading is to have raised execution to a strategic level as well. As much advance planning and post analysis is devoted to daily trading as is to goal setting and long term framework.
We started the CTA after much damage had been done to investors' wealth after the bubble burst in March, 2000. It had become clear that for financial markets, the way back would not necessarily be identical with the strategies that brought portfolios down and into a prolonged recovery. We continue to believe that investments in stock indices, but not individual stocks themselves, continue to hold more promise for growth than other investment classes in the near as well as the long term future. Our experience in the past has clearly demonstrated to us that using modifications of tried and true concepts such as proper portfolio diversification, diligent adaptation to market volatility, dollar-cost-averaging with judicious profit taking throughout the investment term, among others hold the most promise. In our own experience over the past five plus years we have also strengthened our belief that certain specific, non-traditional approaches have been more effective in generating portfolio growth and repairing damaged portfolios over relatively long periods at impressive growth-to-risk ratios.
While we are not wedded to any particular strategy on an a priori basis, but are absolutely committed to matching the best strategic approach to whatever investment opportunity we discern in the ebb and flow of market action. In other words, we do not have a doctrinaire perspective favoring one strategy versus another. It is our interpretation of economic factors, including global economic currents, and their specific impact on markets in question, that most influence our selection of the strategy. A critical part of our discipline of strategy formulation includes a realistic assessment of whether we can successfully execute the strategy.
An overview of our trading process consists of three main functions: analysis, strategy review, and money-management and risk control. The first, analysis, is involved with examining markets to screen investment opportunities and to guide subsequent trading. We are strenuously involved with both fundamental and technical analysis. We depend on the fundamentals to identify opportunities while the technical analysis offers the necessary tools to help achieve more favorable entries and exists for our trades.
Our next step is to develop conviction for what will be the optimal strategy, for the specific opportunity in the market. At the end of the day, the identified opportunity must make sense in terms of our ability to deliver on it in the context of the client's available financial resources and risk tolerance. This leads us to what is often less than fully recognized, the importance of money management and risk control. We believe an integrated and disciplined approach to all the elements discussed is the best way to achieve successful outcomes. However, investment risk cannot be eliminated and profits cannot be guaranteed.
THERE IS SUBSTANTIAL RISK OF LOSS IN TRADING FUTURES AND OPTIONS. ONE
MUST BE AWARE THAT THE POSSIBILITY OF UNLIMITED LOSS EXISTS IN
WRITING OPTIONS. PEOPLE CAN AND DO LOSE MONEY.