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BACKGROUND
Investors generally look to diversify among a number of different markets in order to offset risk. However, traditional trend following programs, while producing adequate long term results, have generated below average returns in recent years. Typical spread trading programs use seasonal patterns which are both well known and unpredictable, producing unstable high risk returns. In recent years, the emergence of large amounts of money in the "long only" commodity fund has had a profound impact on the market. Tested by an experienced trader, this program has been designed to exploit large price movements as a result of long only funds rolling positions from one month to another.
HOW THE PROGRAM WORKS
The program enters spreads between different contract months in the same market. The spread trade is entered several months from expiration and always exits at least one month before expiration of the nearby contract. By exiting the trade before the last month of trading, the spread avoids the very dangerous moves that spreads often make just before expiration. The markets traded in this program are:
- Energies: Crude Oil, Heating Oil, Natural Gas
- Grains: Corn, wheat, Soybeans
- Metals: Silver
- Meats: Live Cattle, Lean Hogs
- Softs: Cocoa, Sugar, Coffee
This program is executed by a professional trader with the average trade length being 1-2 months. Tight stops are used on a close only basis in an attempt to prevent large losses.
TESTING
Dennis Callahan of Vankar Trading, A professional with over 20 years of commodity trading experience, tested this program and analyzed every single trade for the last 3 years in great detail. Dennis observed consistent profitability throughout the test period. For more details on the testing of the model, please call Dennis at 312-578-0225.
MATERIAL ASSUMPTIONS
Several material assumptions are made by the Alpha Spreads Program. All Spreads are entered on the close of trading on the entry date. Therefore, the prices of these entries are the settlement price of the spread on the entry date. Stop loss orders are always placed after a trade has been entered. Stop loss amounts are $500 from the execution price, with the exception of Natural Gas which has a stop loss level of $1,000. All stop loss orders are "Stop Close Only" orders, meaning they can only be elected on the close of a futures contract. As a result, actual loss may exceed stop loss level. For performance calculations, $50 per trade was added to stop loss level when recording trade exits.
In order to view VanKar Trading System results you must first please register with VanKar Trading by completing the form below. Upon registration you will receive an e-mail with a username and password. Should you have any difficulties please call 312-578-0225 for assistance. |
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