Global Macro & FX Fund
Many hedge funds around the world chose to use the Global Macro investment style. This means they follow the macroeconomic developments around the world and they try to exploit the opportunities in a broader selection of financial instruments such as the FX market, longer-term bonds, precious metals and etc. This investment style gives the fund the flexibility to not be limited to a certain market or security type.
As the correlation between many markets and securities increased with the coming of the computerized trading the Global Macro investment style emerged as one of the more successful investment styles. The reason is markets and individual securities have started to respond much more to broader macroeconomic developments than they do to more security specific events. The Global Macro & FX Fund will employ a similar strategy to give investors exposure to general macro movements rather than stock specific events.
The Fund will seek to exploit opportunities mostly in the FX markets, precious metals and broad indices. However some sector specific trading opportunities that can’t be categorized into the other funds can also be implemented within the Global Macro & FX Fund. The Fund will be one of the most actively managed funds and will be moderately leveraged. The Fund will aim to generate outsized returns compared to DJIA on a risk-adjusted basis.
June 15th’ 12 15:37
The Fund has moved solidly into the positive. However I should note that EUR has taken a much bigger hit than I expected when I put on the FX trades. Hence I had to hold on to these leveraged FX trades much longer than I anticipated. That is not a problem for the profitability on the Fund as long as the trades turn positive. However, since the positions are leveraged the longer I hold them, the more those FX trades increase the volatility of the Fund. I would be much happier if I were able to generate profits on my FX trades on a more short-term basis. I am quite confident in those trades, although it would be nicer if I didn’t had to increase the Fund volatility. Once the EUR and AUD normalize, however, the profits would be so great that volatility will probably be not of a big concern.
May 18th’ 12 15:52
A very smart SLV trades brings the Fund back into positive despite heavy losses on the FX positions. The increase in the Fund due to the SLV trade was about 46%. The profit on the trade itself was more than 600%. The market has not given the relief rally that I expected and the FX positions, which carry a huge leverage in the Fund, are negating the effects of this hugely profitable trade. However once the AUD and EUR normalizes in a relief rally the real effects of this huge SLV trade will go through and I expect the Fund to be up close to 90%. This successful trade indicates the merits of seizing the opportunity when it is there for being a successful trader though.
May 7th’ 12 14:42
I couldn’t manage to keep my discipline when trading the developments in the European situation. I should have not traded the FX position but I expected a relief rally and changed the short exposure in EUR and AUD to a very leveraged long EUR position. That of course did not work out too well with the pullback in the market but a relief rally before late May 2012 is still probably a good possibility. Only a 2% move above my cost, 1.3092, for the EUR.USD should greatly benefit the Fund given the leverage. If I can't turn a profit I should keep my discipline and change back to short EUR and probably short AUD.USD before late May 2012.
Mar 30th’ 12 12:17
I just initiated two short EUR and AUD positions which are fairly large. I leveraged the Fund up to 8X with those FX positions but the certainty of Euro degeneration makes them worth the risk. If all goes well I expect the EUR to go down to 1,22 and AUD to go below parity. There will be short-term fluctuations but this is one of the best opportunities to take advantage of medium-term. Margin requirements on FX positions are quite relaxed so the leverage should not cause any margin calls if the market moves against this trade a little. I will also try to refrain from trading this position until I reach my goals.
Mar 8th’ 12 10:32
I wrote an interesting article in SeekingAlpha about the status of the EUR after the ECB liquidity operations. Since the EUR.USD cross is the main position in the Fund, you can check it out to learn more about my reasoning for holding on to this trade.
Jan 27th’ 12 15:53
The Fed move definitely caught me off guard in the Global Macro Fund. Unfortunately my SLV puts which were set up to triple in value before the Fed announcement are going to expire without any value. EUR.USD cross has also moved higher. The Fund was up almost 11% so even these hits don’t change the fact that the Fund is performing remarkably. Also, the main position in the Fund is the short EUR.USD cross so any bad news out of Greece or Portugal should crash the EUR and put Fund back up 15% or more.
Jan 5th' 12 9:55
I had initiated the short EUR.USD position to take advantage of a quick move towards 1.28. The market has reached that level but the way it has developed is it seems like a more sustained move below 1.28 is on the way so I won't close out my position. There might be one more jump from the 1.28 before a decisive move below but to try to take advantage of that is too risky. Rather I will try to exploit the main trend towards 1.20.
Dec 14th' 11 15:57
I initiated a short EUR.USD position. The consensus is that the EUR will get to 1,28 before it can bounce back. In any case the long-term trend for the EUR
Dec 14th' 11 15:38
I did not have a chance to initiate new SLV put positions as the price didn't come down enough to get in. There probably is a way to go down for SLV and the Fund might miss those returns but no need to be greedy as a sudden spike in SLV would wipe out all the 500% gain on the investment.
Dec 14th' 11 11:17
I have closed out my SLV Put options with approximately a 500% gain on the investment. I plan to reinitiate the position at a more favorable level but I closed out the position not to get too greedy.
Dec 14th' 11 9:58
The Fund has quadruples its investment on the SLV puts. I have evaluated taking some profits out but I will wait until SLV drops to 28 and then decide based on market dynamics.
Dec 12th' 11 10:32
I also want to comment on why I chose to trade SLV and not any other precious metal to put on a trade. The implied volatility is very rarely wrong as option sellers are some of the smartest bunch around but in the case of SLV the implied volatility really seems to be underestimated. The implied volatility on SLV is about 45%. In major market moves to the downside SLV straight out crashes about 50% much more than many high-beta stocks with implied volatilities of 70% and more. Therefore this mispricing of options creates good opportunities on a risk adjusted basis to put on some unhedged option trades.
Dec 12th' 11 9:58
I did put on my SLV trades. Given the imminent downside movement I expect I decided the most efficient way is to buy put options expiring in 5 days but to keep the risk minimum by investing only 2.5% of the fund. I could have taken a short position on SLV in the amount of 300,000 and then hedge it with selling out of the money puts but I did simulate some scenarios and the expected payout of that turns out to be about the same with trade I just made. Why risk 300,000 when you can do the same trade with 25,000.