A little late, but a few things have changed. First, a significant increase in funds to the traded account, which requires a re-baseline of performance history after this month. Second, a shift in strategy as hedging became increasingly necessary for some positions — and more than two sub-accounts are managed.
This is a good thing. I’m learning a lot about what it will take to manage multiple “sub-strategies” across multiple accounts, while remaining firmly anchored within my overall strategy and performance parameters. Not going to lie: This is difficult to do with a full time job.
On to the performance stats for September. The results below obviously exclude the change in account size.
Lots of volatility this month as I unwound some losing positions. Still many more losing positions to unwind, and still uncomfortable with the level of volatility at a fixed fraction of 1/40,000. To ease into this larger account, I will scale back my engagement and will also reduce position size. Going forward, hedging will become more important. The trade-off is that my transaction costs will increase, mostly from negative roll across the sub-accounts. I’m confident that I’ll find my way.
My realized result for September was much higher than projected. This was not the plan, which for the reasons given above is a little troublesome for me. A lot of gurus (not confirmed traders) out there have said, written and tweeted that account size shouldn’t matter with a systematic approach in sufficiently liquid markets. A lot of traders have said, written and tweeted that it does matter. I’m anxious to see how it goes.
Still wrong about these markets. Realized gain for August was just over 2%. The projection was just over 1%. Some losing positions were effectively offset this month, but not as many as I had hoped. (Only about -1% of NAV was offset.) Volatility on the equity curve illustrates the balancing action I was attempting — it was up and down for a few days, but at no time was I uncomfortable. The model remains under-deployed, with less than 10% of capital on margin and only 14 trades in the book.
The estimate for September is 0.85% and will likely remain low for remainder of the year, as the plan is to be more aggressive in offsetting losing positions (and to protect gains already realized).
The annual target of 18%-28% is what is important. Turbulence is anticipated, but there is enough time (and opportunity) to offset losing positions and still make the annual target. The other priority, of course, is to limit draw-down on capital. While the month-to-month volatility bounds are +2%/-2%, actual NAV was -3% to -5% over the past three months. Fortunately, YTD max draw down is -5.7%.
While there are a few aspects of this model that continue to frustrate, the overall management strategy is working.