Spread Trading: GPAM
August 18, 2016
Foremost Capital Management connected with Gregory P. Asset Management (GPAM) and discussed their Seasonal Spread and Options Strategy program. Foremost likes the longevity and lower volatility of the program. Could be a great program to use in a portfolio of CTAs depending of course on the goals of the investor, risk capital and the investor’s palate for time, reward, and risk. This is what GPAM had to say:
“Technology is now a critical component of investment management. Algorithms and computers are dominant forces in the markets, which makes it difficult to make money trading just outrights. And with outrights, we can only earn money if we are on the right side of the market. However, by trading spreads, we are entering the market simultaneously buying or selling 2 contracts that are highly correlated, often the same commodity (calendar spreads).
When trading commodity futures spreads, it is essential to identify the difference between supply and demand of consumable products. This allows a determination of market capacity: Is the commodity in abundance or shortage. This is easier to detect than an index movement. Additionally, seasonality is an important factor in spread trading. Seasonality is simply the annual reoccurrence of behaviors in the same time period. Seasonality occurs as a result of habitual human behavior: We reap the harvest every year at the same time (grain production), we use heat when it’s cold (heating oil and electricity), and we have barbecues in summer (increasing the demand of meats). These common seasonal behaviors provide trading opportunities.
In addition to this, we monitor fundamental data, reviewing how the spread market may move and then making a decision in our seasonal chart. Furthermore, an analysis of statistical correlation and the average regression shows that a big deviation between highly correlated products tends to regress to their mean, which leads to trading “butterflies” and “condors”, which are multi-leg intra-commodity spreads usually used for speculating on changes in the term structure of futures contracts. Another play can be mean reversion as they can move in nice range.
An investment with Seasonal Spread and Options Program (SSOS) is likely to have a relatively low correlation with your other investment products. I also believe that after conducting due diligence on our strategy you will find that in my opinion, we have adequate risk returns ratios and sound risk management techniques in place. If you are looking for exposure to managed futures; I believe the “Seasonal Spread and Option” program may be an optimal fit for the diversification needs of your investment portfolio. The BOTTOMLINE: The combination of futures spreads, seasonal data, fundamental filters, and statistical correlation enables us to achieve an “edge” to generate ALPHA.”
Performance from Sept 2009 through Jul 2012 is of Greg Placsintar (Exempt Foreign Advisor) – Performance from Aug 2012 is client performance of Gregory P. Asset Management, LLC.
+ NOTES: The performance capsule represents the performance results of actual client trading accounts. These accounts were managed by firm principal Gregory Placsintar who was not required to be registered with the CFTC because his client accounts were all foreign to the United States. Mr. Placsintar’s trading in this capacity occurred from September of 2009 until August of 2012. Beginning in August of 2012 discretion over these foreign accounts was transferred from Greg Placsintar the individual to Gregory P. Asset Management, LLC the US-based and registered CTA. The capsule, for the entire period presented, was prepared by utilizing actual realized and unrealized gains and losses on commodity futures trading, net of related brokerage commissions and other trading costs. In the presentation from September of 2009 until August of 2012, the accounts shown within the capsule were not charged fees as described in this document. These accounts also may not have been charged commission rates similar to what your account may pay to participate in the Seasonal Spread and Options Strategy. To properly consider the management and incentive fee’s disclosed, the fees required by the program were Pro-forma adjusted into the return presentation for this period of time. As of August 2012, all advisory fee considerations and standard commissions have been considered on an actual basis.
NO REPRESENTATION IS MADE THAT GREGORY P. ASSET MANAGEMENT, LLC OR ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS SIMILAR TO THOSE SHOWN IN THE SUBSEQUENT PAGES. THERE CAN BE NO ASSURANCE THAT ANY ACCOUNT WILL MAKE ANY PROFITS AT ALL, OR WILL BE ABLE TO AVOID INCURRING SUBSTANTIAL LOSSES.