CREDIT PREMIUM PROGRAM (CPP)
OPTION SELLING STRATEGY (OSS)
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Posts Tagged ‘FCI Returns’
FCI – Barclay Top 20 CTA Performer Past 5 Years
Tuesday, May 25th, 2010FCI is proud to report a position in the Barclay Top 20 CTA Performers; based on 5-yr compound annual returns, out of a total group of approximately 290 CTAs managing over 10m. Past returns are not necessarily indicative of future returns.
How Do We Calculate Management and Incentive Fees in the OSS and CPP Programs?
Friday, March 5th, 2010By Jamie Walters of FCI
Friday, March 05, 2010 @ 5:37:17 PM EDT.
In the Credit Premium Program (CPP), the fee structure is as follows:
| Management Fee: 1% |
| Incentive Fee: 25% |
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Consider the following example for CPP.
Start Date: First day of the month.
Initial account value: $50,000
On the first day of the month we take a management fee of 1/12 of 1% from the beginning of the month account balance of $50,000. Thus, FCI would take $42.00 for management fees from a $50,000 funded account. This management fee is for the starting month.
Let’s say that the monthly return for CPP before incentive fees is 5%, for example. This means that the account value has grown by 5% from $50,000 to $52,500 by the start of the next month before incentive fees. Just to be clear, a 5% monthly return before incentive fees is calculated as:
($52,500 – $50,000) / $50,000, and not as ($52,456 – $49,958) / $49,958. In other words, the beginning-of-month account balance used in calculating the return for the month is not net of the management fee that is withdrawn at the beginning of the month.
On the beginning of the second month, we would take 25% of the profit added to the account from the prior period as incentive fees. Thus, we would collect $625 (= 25% of $2,500) on the beginning of the second month as incentive fees. This leaves the client account at an opening balance of $51,875 (= $52,500 – $625.00) for the first day of the second month.
On the first day of the second month we take a management fee of 1/12 of 1% from the beginning of the month account balance of $51,875. Thus, FCI would take $43 for management fees from a $51,875 beginning-of-period account balance on the first day of the second month. This management fee is the management fee for the second month.
The balance of $51,875 for the start of the second month is the new high-water mark for the account as of the first day of the second month. This means that FCI will not collect any incentive fees from the account at the end of the second month (first day of month three) unless the ending account balance on the last day of the period is above the high water mark of $51,875.
Note that in this example, the account experienced no additions or withdrawals of funds by the client. In addition, the account was started at the beginning of a period; in this case, at the beginning of the first month, and thus, no time-weighting is involved.
In the Option Selling Strategy (OSS), the fee structure is as follows:
| Management Fee: 2% |
| Incentive Fee: 20% |
Consider the following example for OSS.
Start Date: First day of the month
Initial account value: $50,000
On the first day of the month, we take a management fee of 1/12 of 2% from the beginning of the month account balance of $50,000. Thus, FCI would take $83.33 for management fees from a $50,000 funded account. This management fee is for the first month.
Let’s say that the monthly return for OSS before incentive fees is 5%, for example. This means that the account value has grown by 5% from $50,000 to $52,500 by the start of the second month before incentive fees. Just to be clear, a 5% monthly return before incentive fees is calculated as
($52,500 – $50,000) / $50,000, and not as ($52,412.50 – $49,916.33) / $49,916.33. In other words, the beginning-of-month account balance used in calculating the return for the month is not net of the management fee that is withdrawn at the beginning of the month.
On the beginning of the second month, we would take 20% of the profits added to the account from the prior period as incentive fees. Thus, we would collect $500 (= 20% of $2,500) on the first day of the second month as incentive fees. This leaves the client account at an opening balance of $52,000 (= $52,500 – $500.00) for day one of the second month.
On the first day of the second month, we take a management fee of 1/12 of 2% from the beginning of the month account balance of $52,000 Thus, FCI would take $86.66 for management fees from a $52,000 beginning-of-period account balance on the first day of the second month. This management fee is the management fee for the second month.
The balance of $52,000 for the start of month two is the new high-water mark for the account as of the beginning of month two. This means that FCI will not collect any incentive fees from the account at the end of month two (on day one of month three) unless the ending account balance on the last day of the period is above the high water mark of $52,000.
Note that in this example, the account experienced no additions or withdrawals of funds by the client. In addition, the account was started at the beginning of a period; in this case, at the beginning of the month, and thus, no time-weighting is involved.
Be advised that because FCI receives Incentive Fees, it may be inclined to trade in a more speculative manner than if it received only a percentage-of-assets fee. Please refer to the disclosure documents for either OSS or CPP for more information at http://www.financialii.com/financial-commodity-investments/disclosure-document.html
FCI would like to bring to your attention that there are substantial risks involved in trading futures and options on futures. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. The volatile nature of the futures and high degree of leverage used in commodities may result in clients losing more than their original investment. Please consider carefully whether futures or options are appropriate to your financial situation.
Futures Magazine’s “Top Traders of 2009″
Friday, February 26th, 2010
Futures Magazine’s “Top Traders of 2009″ includes a familiar face.Congratulations to Craig Kendall and the trading team at FCI for being recognized by Futures magazine as one of the Top Traders of 2009! See article preview below:
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It is no surprise that Financial Commodity Investments’ (FCI) Credit Premium Program (CPP) did well in 2009 — most option writing programs had a good year — but it was also up in 2008, making it quite unique. FCI President Craig Kendall is a certified public accountant and longtime investor with a pretty good sense of timing. He exited real estate in 2006 and took profits in equities before the dotcom bubble burst.
As an accountant who had helped take a couple of companies public, he was amazed at the valuations he was seeing in the late 1990s and knew he needed to diversify his holdings.
In the early 2000s, he opened an account with famed option writer Max Ansbacher and became a protégé of his. What struck Kendall about the strategy after a conversation with Ansbacher was its simplicity, so he went about creating his own advisory.
“First of all, in futures you have increased leverage and if you take some risk, the returns can be commendable but managing the risk is ever so important, especially in options writing. I don’t need to tell you that a lot of the competition is not around today,” Kendall says.
So in 2003 he became a registered CTA and investment advisor. He launched his Options Selling Strategy (OSS) in 2004 and the CPP in 2006. What distinguishes both of his programs is that they trade a diversified group of markets instead of concentrating on equity indexes as most options writers do. Each program has roughly $10 million under management.
“There were a lot of options writers out there and I thought why not take the same strategy and diversify it across different commodities,” Kendall says. “With this strategy we are really a short volatility play and there are times when the volatility on the S&P doesn’t warrant doing credit premium selling because the risk/return just isn’t worth it. But by doing the extra research and finding the volatility opportunities amongst various commodities [we find opportunities] to make good trades that can be a lot less risky than doing the S&P.
Click here to continue… then go to page 3.
FCI-OSS Program Performance VS. S&P 500 Index
Monday, February 1st, 2010Option Selling Strategy (OSS)
Click to enlarge
Past performance not necessarily indicative of future results.
FCI would like to bring to your attention that there are substantial risks involved in trading futures and options on futures. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. The volatile nature of the futures and high degree of leverage used in commodities may result in clients losing more than their original investment. Please consider carefully whether futures or options are appropriate to your financial situation.
FCI – Continues 2009 with Positive Returns
Thursday, December 3rd, 2009WASHINGTON DC – December 3, 2009 - Financial Commodity Investments, (FCI), a registered Commodity Trading Advisor (CTA), announced today that it is reporting positive returns with their FCI programs.
Returns with each program for the month of November, 2009 and YTD are as follows:
FCI-Option Selling Strategy (OSS) 4.8%
FCI-Credit Premium Program (CPP) 3.6%
(Past performance is no indication of future results. Returns are net of all fees)
In comparison, the S&P was positve 4% for the month of November and is now a positive 18% for the year. Here at FCI, we continue to be amazed at the recovery of the equity markets in such a short period of time.
Are we in another “Bubble”?
If you take a current snapshot of the equity and commodity markets, you will be amazed at the recovery and the current values that exist today, especially when comparing to this time last year and the future outlook. The equity market has recognized 175% improvement in values within the last six months. A precious commodity such as Gold has now almost doubled in price within the last year alone.
To help us keep this in perspective, our equity markets are now valued with a higher price earnings ratio (P/E ratio) than at this time last year. And it was this time a year ago, when the equity markets had a 50% decrease in value. (Is America’s corporate enterprises really worth more now and are they really going to generate even greater and faster future earnings than they did in the past few years? ) If we are truly going to have outstanding and sustaining future growth, then maybe the current valuations of corporate America is justified. Yet with all the financial deleveraging that has and continues to take place, we believe that future growth will be much lower. With slower growth, you will have slower earnings and valuations are based on future earnings and growth. And so all we are saying is “Buyer beware”.
Valuations today may be unrealistic in relation to realizations of future earnings and valuations.
Gold during the 1980’s went from $400 to $800 an ounce, and then only to subsequently retreat back to $300.
Real estate from 2004 to 2007 had its greatest price appreciation in the shortest period of time. We all know what has happened subsequently to the great run and investments in real estate. Remember when everyone said real estate was a good investment and would not do down in value.
We are not inferring that all values are going to crash and burn; we are trying to illustrate that “Bubbles” do exist from time to time, and there also is a good trend and predictability to what happens subsequently when “Bubbles” in valuations do exist.
These are certainly “Uncommon Markets”. Investing wisely and investing with positive “Alpha” seems to be a good strategy as equities and commodities move into uncommon territories.
Positive Multiple Year Annualized Returns with the FCI Program
The FCI-OSS program has generated a positive annualized yearly return of 21% for the five years ending November, 2009, and the FCI-CPP program has generated a positive annualized yearly return of 24% since inception. Yet the equity markets have a negative annualized return of 8% for the three years ending October, 2009. How have we done this? One might think our results are directly related to rising values in the equity and commodity markets. They Are Not. Our strategy of “Absolute Returns” aims to make money for our investors irrespective of the direction of the equity and/or the commodity markets. Our predominate strategy is to sell short term dated options. The majority of investors purchase options to hedge their underlying positions. This bias towards buying options, rather than selling them, inflates the price of options in comparison to their theoretical value. One can take advantage of this pricing disparity and, as a result, can generate potentially consistent positive returns with little or no correlation to the markets.
Note: A buyer of options does limit his risk to the amount of the investment in the option. The writer, or seller of options, takes on unlimited risk. There is no limit on how large the loss can be. Losses can and will be the amount that the option is “in-the-money” at the time of expiration, should the option actually expire in the money.
The FCI programs execute our strategies only in liquid markets, such as the grains, the currencies, and the energies commodity markets. Additionally, we enter into contracts where there is sufficient volume and liquidity, such that our contracts are not a significant portion of the total open interest at a certain strike price.
About Financial Commodity Investments (FCI): FCI and its related entity, FII, is a unique, customer-driven, results-oriented registered investment management firm. FII is devoted to providing the highest levels of customer service to its valuable clients. FCI has consistently exceeded the S&P 500 over the last three years and is focused on providing its clients unique alternative investment options. (Past performance is no indication of future results.)
To learn more about Financial Investments, Inc. (FII) and Financial Commodity Investments (FCI), visit www.financialii.com and/or www.financialcii.com or call 703 435-2777.
FCI is a commodity trading advisor (CTA) service registered with the Commodity Futures Trading Commission (CFTC). FCI executes investment strategies on behalf of an investor directly in the investor’s own account. FCI trades options in a diversified range of commodities including energies, grains, softs, metals, and financial commodities. FCI is open to non accredited investors with a minimum of $50,000. Participants in FCI have unlimited risk. You can learn more about FCI at www.financialcii.com
Risk Disclosure
There are substantial risks involved in trading options on futures and equities. The high degree of leverage that is often obtainable in options trading can work against you as well as for you. The volatile nature of the futures and high degree of leverage used in options may result in clients losing more than their original investment. Please consider carefully whether options are appropriate to your financial situation. Only risk capital should be used when trading options on futures and equities. Past results are not necessarily indicative or a guarantee of future results. Security futures/options products are not suitable for all individuals.