September’s Volatility Leads to Price Persistence and Interesting Managed Futures Market EnvironmentsBy Mark Melin
Another month yet another debt-inspired volatility spike hit equity markets, as the contagion spread to commodity markets as well.
In managed futures this volatility spike appeared to be generally positive for trend followers and reasonably neutral for spread traders. Many short volatility programs were hard hit, with some notable exceptions being the diversified short volatility programs that hedge their risk exposure. Those diversified managed futures programs that included a long gold volatility hedge to short volatility option selling programs encountered degrees of temporary difficulty.
To provide context, managed futures projections are eyeing positive performance near up 1% during the 9/20-22 volatility spike. Overall managed futures performance in September is estimated to potentially end the month up near 2%, boosted largely by the performance of trend followers.
For many short term trend following systems the volatility spike may have created opportunity, as negative downward trends over the few days of the volatility spike were generally powerful and consistent across the board markets.
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About the Author: Mark Melin is a managed futures specialist. An industry practitioner and consultant, he has taught managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade‚Äôs Handbook of Futures and Options (McGraw-Hill 2008). Mark writes about managed futures investment performance and uncorrelated portfolios based on a performance driver method of diversification. For institutional investors and high net worth individuals, he assists in building managed futures investment portfolios. He also consults with financial services firms, helping them integrate appropriate managed futures programs into their traditional product offerings, and assists Commodity Trading Advisers in clearing and execution of their trading programs. Currently a registered associated person at Peregrine Financial Group, his National Futures Association ID number is 0348336. Mark has also worked as an independent consultant to various broker dealers and futures exchanges, including OneChicago and the Chicago Board of Trade. For further information visit www.Go2ManagedFutures.com or e-mail info@Go2ManagedFutures.com
All contents copyright 2011 ¬© Mark H. Melin all rights reserved.
Risk Disclosure: This article is intended for educational and informational purposes. Past performance is not always indicative of future results. There is risk of loss when investing in futures and options. Managed futures investing can involve volatility and may not be appropriate for all investors. The opinions expressed are solely those of the author, they are not appropriate for all investors and may not have considered all risk factors.