Futures Strategy
The Momentum Trading Program is based on the belief that technicals and fundamentals are both key to making investment decisions. It is the momentum of the market that creates trends. When the momentum of the market is leaning in one direction, and the fundamental factors of the market are also leaning in the same direction, it is believed that prices will reflect a trading opportunity.
Technical analysis of the markets generally includes a study of, among other things, the actual daily, weekly, monthly and yearly price fluctuations, volume variations, or changes in open interest, utilizing charts, computers, or a combination of the two. Fundamental Analysis relies on a study of external factors that affect supply and demand of a particular commodity in order to predict future price movement.
The key indicators of the program, involves two main momentum indicators used in technical analysis and a fundamental factor evaluation. The following program offered below is designed to participate in short, intermediate and long-term trends in the futures marketplace. Various time periods and types of charts will be used in analysis.
The first indicator is the Moving Average Convergence Divergence (MACD): A trend-following momentum indicator that shows the relationship between two moving averages of prices. The next momentum indicator is the Stochastic Oscillator: A technical momentum indicator that compares a security's closing price to its price range over a given time period. The oscillator's sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result.
The “Momentum Trading Program” weighs the momentum of the market when both the MACD indicators are crossing over, and the Stochastic Oscillators are also crossing over at the same time. This happening will furnish the trading program with a signal to either buy or sell a position in the marketplace. This signal is then weighed against a fundamental factor of the marketplace at that same time.
Each commodity traded will have an evaluation of the fundamental factors involved. The factors involved will be determined with either a bearish, bullish, or neutral signal to prices. At the discretion of the Plan Administrator each fundamental factor will be weighed, and as a result of the weighted factors either a buy, sell, or hold signal will be assigned.
Options Strategy
By combining premium selling strategies with natural expansion and contraction of Implied Volatility (IV), high probability trades with very nice returns and limited risk can be constructed. When IV increases, so do option values and the premiums received when selling them, this helps offset risk and increase returns.
The key to consistent success with premium selling is to utilize a strategy that can create the desired return with a tolerable amount of risk. The strategies employed in this program are based on the following assumptions:
- 80% or higher Implied Volatility.
- 80% or higher probability.
- Strike prices and breakevens within upper 90% of highs and lows of six-year weekly charts.
- Return on investment.
Main option strategies involve selling out-of-the-money uncovered options and strangles.
Other strategies used at times include calendar spreads, inter and intra market spreads.