Investment Resources | Managed Futures | Research, Articles, Education

Research / Articles

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TRADING FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS. THERE ARE NO GUARANTEES OF PROFIT NO MATTER WHO IS MANAGING YOUR MONEY. PAST PERFORMANCE IS NOT NECESSARILY FOREMOST TRADING, LLC RISK DISCLOSURE STATEMENT INDICATIVE OF FUTURE RESULTS.

All Foremost Trading associated information, publications, reports, including the Foremost Trading, LLC website and the websites of its DBAs, distributed by Foremost Trading, LLC shall be construed as a solicitation. Foremost Trading LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. The following link or document may contain information obtained from sources believed to be reliable, and or has been created by another firm or body. Such information is being provided as a courtesy but such information has not been independently verified and Foremost Trading, LLC, does not guarantee its accuracy. Information and opinions expressed by a source or author other than Foremost are not necessarily supported by Foremost and Foremost makes no guarantees of such. Any mention of performance in any context whether actual or hypothetical is no guarantee of future results. Phone calls to and from Foremost Trading, LLC or its DBAs may be recorded.

THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE FOLLOWING: IF YOU PURCHASE A COMMODITY OPTION YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF ALL TRANSACTION COSTS.

IF YOU PURCHASE OR SELL A COMMODITY FUTURES CONTRACT OR SELL A COMMODITY OPTION YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS OR SECURITY DEPOSIT AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUESTED FUNDS WITHIN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT. UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET MAKES A ‘‘LIMIT MOVE.’’

THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A ‘‘STOP-LOSS’’ OR ‘‘STOP-LIMIT’’ ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. A ‘‘SPREAD’’ POSITION MAY NOT BE LESS RISKY THAN A SIMPLE ‘‘LONG’’ OR “SHORT” POSITION.

THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY INTEREST TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THE CTA DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF THE PRINCIPAL RISK FACTORS AND EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR (“CTA”).

A COMPLETE DISCUSSION OF FEES AND CHARGES ARE REPORTED IN THE CTA’s DISCLOSURE DOCUMENT. MANAGED FUTURES MAY NOT NECESSARILY BE PROFITABLE UNDER ALL MARKET CONDITIONS AND ALSO MAY NOT NECESSARILY REDUCE VOLATILITY.

THIS MATERIAL MAY MENTION SERVICES, WHICH RANK THE PERFORMANCE OF COMMODITY TRADING ADVISORS. PLEASE NOTE THAT THE RANKINGS APPLY ONLY TO THOSE CTAS WHO SUBMIT THEIR TRADING RESULTS. THE RANKINGS IN NO WAY PURPORT TO BE REPRESENTATIVE OF THE ENTIRE UNIVERSE OF COMMODITY TRADING ADVISORS. THE MATERIAL IN NO WAY IMPLIES THAT THESE RESULTS ARE OFFICIALLY SANCTIONED RESULTS OF THE COMMODITY INDUSTRY. BE ADVISED THAT AN INDIVIDUAL CANNOT INVEST IN THE INDEX ITSELF AND THE ACTUAL RATES OF RETURN FOR AN INDIVIDUAL PROGRAM MAY SIGNIFICANTLY DIFFER AND BE MORE VOLATILE THAN THE INDEX. INVESTORS SHOULD NOTE THAT ADDING MANAGED FUTURES TO AN EXISTING STOCK PORTFOLIO CAN POTENTIALLY INCREASE THE ANNUAL RETURN OF THAT PORTFOLIO. THE ADDITION OF MANAGED FUTURES TO A PORTFOLIO HOWEVER CANNOT PROTECT YOU FROM LOSS AND IN FACT CAN DECREASE A PORTFOLIO’S EFFICIENCY.

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Podcasts and Video

One Plan Sponsor’s Journey into Allocating to Managed Futures

Date: 24 Jul 2015

On this Managed Futures podcast, Brennan Basnicki, CFA, CMT Senior Analyst – Absolute Return with the Teachers Retirement System of the State of Illinois, takes the listener through the step-by-step process the system used when deciding to allocate to managed futures through CTAs. This podcast includes dealing with the board, the educational element, and due diligence matters.

Pension consultant perspective on interest rates, performance, and tail risk.

Chris Solarz, Managing Director at Cliffwater LLC, offers a pension consultant’s perspective on the performance of CTAs, discusses tail risk, and provides some insight into the current interest rate environment. Click here to listen to the Podcast.

Education and Information

General Managed Futures Topics PDFs

Managed Futures: Portfolio Diversification Opportunities

Going Up? Where to Find Returns if Rates Begin to Rise

CTAs and Rising Interest Rates: Is the Party Over (LINK?)

Prospects for CTAs in a Rising Interest Rate Environment - Monetary Policy Has a Minimal Impact on CTA Performance

The last sustained rise in interest rates, as defined by the direction of the Fed Funds rate, ended in 1982. Since then, with the exception of just a few years in each of the last three decades, the US Federal Reserve has proffered an easy money policy, gradually guiding interest rates down from the Volker-era stratosphere.

Chapter 1: Historical Perspectives Trend Following with Managed Futures

A preview of a soon-to-be-released book about trend following and analyzing CTA returns in an understandable framework. This book provides valuable insight into the nature of trend following through examples. It brings academic rigor to the evaluation of CTA strategies.

Managed Futures Information From The CME Group

Managed Futures FAQ*

10 Reasons to Consider Managed Futures*

Qualified Eligible Person (QEP) definition from NFA

What is a Commodity Trading Advisor or CTA?

A Commodity Trading Advisor or CTA is a trading firm or person that will manage Investment accounts for investors. Some key attributes that separate a CTA from other styles of trading investments in the futures & commodities world include:

CTAs publish what is a called a “Disclosure Document.” It details information about the CTA, the trading style or strategy, markets traded, if options are used, starting minimums, performance data, and principal background. CTAs publish performance net of any and all fees. The performance in promotional documents reflect a composite of all accounts in their trading program and that performance should be reviewed in conjunction with the Disclosure Document.
The CTA manages the accounts via a limited Power of Attorney (POA). An investor will have their own individual separated account: that is, their account and the traded futures contracts are not co-mingled with anyone else’s trades unlike a pool or a fund which are.
A CTA program has two types of fees that typically can be charged:
- A management fee | This fee often ranges from 0% to 2.25% annually, usually billed monthly or quarterly in arrears. The fee is generally calculated as a percentage of the annualized asset value in the account on the end-of-month or end-of-quarter date.
- An incentive fee | The CTA charges a percentage of profits. This is the “incentive” the trader has in order to make money for the client. The incentive fee is only charged on net profits, net meaning after prior incentive fees and all costs of trading have been deducted.
- These comments are generally true for most CTAs however, an investor must read the disclosure document of the CTA to know the details as they relate to their account and situation
RISKS – While the benefits of using CTAs to manage your futures investments are numerous, there is no way to completely eliminate risk. Investments in futures contracts are inherently risky due to the significant leverage involved in the type of contracts traded. Each investor must carefully consider whether these types of investments are appropriate for them. Investing in futures provides the opportunity for elevated returns and with that opportunity comes the elevated risk of loss. Only true risk capital should be used to invest in futures, including CTA-directed programs.
A Foremost Capital Management Alternative Investment Specialist can assist you with selecting a CTA.

Disclaimer: This information was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.