Opes Capital Group, LLC Trading Program 2012 CTA Disclaimer THE - - PowerPoint PPT Presentation

Opes Capital Group, LLC Trading Program 2012

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

CTA Disclaimer THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THE DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF THE PRINCIPAL RISK FACTORS AND EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR (“CTA”). THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION (“CFTC”) REQUIRE THAT PROSPECTIVE CLIENTS OF A CTA RECEIVE A DISCLOSURE DOCUMENT AT OR PRIOR TO THE TIME AN ADVISORY AGREEMENT IS DELIVERED AND THAT CERTAIN RISK FACTORS BE HIGHLIGHTED. THIS DOCUMENT IS READILY ACCESSIBLE AT THIS SITE. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY MARKETS. THEREFORE, YOU SHOULD PROCEED DIRECTLY TO THE DISCLOSURE DOCUMENT AND STUDY IT CAREFULLY TO DETERMINE WHETHER SUCH TRADING IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. YOU ARE ENCOURAGED TO ACCESS THE DISCLOSURE DOCUMENT BY CLICKING BELOW. YOU WILL NOT INCUR ANY ADDITIONAL CHARGES BY ACCESSING THE DISCLOSURE DOCUMENT. YOU MAY ALSO REQUEST DELIVERY OF A HARD COPY OF THE DISCLOSURE DOCUMENT, WHICH ALSO WILL BE PROVIDED TO YOU AT NO COST. THE CFTC HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR ON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE DOCUMENT. OTHER DISCLOSURE STATEMENTS ARE REQUIRED TO BE PROVIDED YOU BEFORE A COMMODITY ACCOUNT MAY BE OPENED FOR YOU.

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Opes Capital Group, LLC Performance Results Since Inception

The Opes Team

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Combined over 20 years of financial markets, marketing, and investment experience.

Joshua Farahi, Principal, Director of Investments

• Mr. Farahi has worked in finance for over a decade as a private wealth manager. During his

career Mr. Farahi served in a number of business and compliance roles including Market Strategist, Branch Principal, Investment Advisor Representative, Options Principal, and as a risk and volatility analyst for a proprietary derivatives portfolio. This experience was instrumental in establishing the Opes Capital trading program's risk management structure. As Directory of Operations and Investments Mr. Farahi is responsible for oversight of the firm and the correct implementation of the firm’s market strategy. Mr. Farahi became registered with the CFTC as an Associated Person in July 2009 and became an Associate Member of the NFA in July 2009. Mr. Farahi found Opes Capital Group, LLC in 2009. Mr. Farahi is a CFA Level II Candidate.

Navid Sohrabi, CFA, Sub-Advisor

• Mr. Sohrabi has worked as a trader or portfolio manager in a multitude of investment styles

ranging from long/short equity to global macro. Mr. Sohrabi began his career as an equity/derivatives trader at KL Group in 2001 and quickly rose to head trader within three years. He continued his career as a derivatives portfolio manager at NewPoint Securities LLC in 2005 trading futures and options. In September 2007, Mr. Sohrabi joined Pantera Capital Management, LP, a global macro hedge fund, where he analyzed and executed trades in various asset classes in both domestic and international markets. He helped develop Opes’ trading strategy and has been involved with the firm in multiple capacities since inception.

The Opes Way

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Operational Aspects:

Opes’ Client accounts are separately managed accounts traded through Interactive Brokers, LLC**, which has and an expansive catalogue of products. Additionally, their technology is competitive and their interface is easy to use for both the Portfolio Manager and clients (clients receive daily statements). Interactive Brokers currently has over $4.6 Billion in equity capital. An important aspect of our program is the transparency afforded to our clients . Each client account is a separately managed account that has its own account number with Interactive Brokers, LLC. Client funds are never comingled with other accounts, and each client has

• nline access to check the status of their account and to request money wires at their own

discretion. An additional layer of transparency that Opes provides its clients is that client performance results are calculated by a 3rd party provider, Compliance Supervisors, Inc., which has access to all trading data directly through Interactive Brokers. Because Compliance Supervisors is a third party accounting firm, we believe this relationship further strengthens the integrity of our performance numbers.

For more information on Interactive Brokers, LLC go to: http://www.interactivebrokers.com/en/p.php?f=ibgStrength

**Opes Capital has established give-up relationships with other FCMs, please contact for more information.

What We Trade

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Opes Capital Trades Options on S&P Futures Contracts

The S&P 500 futures market has now become today's most actively traded equity futures contract. The S&P's futures contract represents roughly 90% of all US stock index futures trading. S&P e-mini futures options trade about 150K contracts daily. The S&P 500 is comprised of the largest 500 listed stocks, therefore allowing you to easily and effectively buy or sell an extremely well diversified portfolio of stocks in

• ne stock index futures contract.

This allows you to make trading/investing decisions based on your overall outlook of the stock market. The advantages of options in our strategy are the inherent leverage in the contracts and the increased margin of error.

The Opes Way

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

The Opes Trading Program trades the equity markets (trend and counter trend) using

• ptions on the S&P e-mini futures. Some traders use stocks, others futures; we use
• ptions. Our strategy is discretionary and based on proprietary technical models, a

systematic capital deployment program, and a dynamic risk management system. The strategy has returned over 76.49% net since inception (October 2009) in a very volatile and unpredictable market. (Returns are audited by a third party and are available upon request) Return Objective: Consistent returns independent of market direction. Goal is 3-6% quarterly. Risk Objective: Implicit risk management through systematic capital deployment. Discretionary parameters set by peak to trough analysis. We hedge directly by using spreads when trading calls. Additionally, our positions have low delta and strict position limits to counter risk. When trading puts we also use spreads to limit our potential loss in a persistent negative market. As a result, in such markets our maximum loss is defined upon entry. Spreads also help mitigate our gamma risk.

The Opes Way

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Investment Process: We begin with a 3-6 month economic and market outlook, then break it down into 4-6 week trading windows. This process encompasses analyzing current and expected economic conditions, historical precedent, current and expected volatility, various technical indicators and multiple proprietary technical models. Current implied volatility and any immediate expected changes are incorporated into the short term focus when selecting optimal strikes to add to the portfolio. Potential trades are filtered through a risk management model which includes value at risk and margin considerations. The program’s focus is the S&P 500 index to minimize the portfolio's unsystematic risk. There are strict position, overall market direction, daily execution, and account margin limits, which all contribute to risk management structure. As option/volatility sellers, our risk framework is crucial to our program’s sustainability. The trades are then executed according to the Portfolio Managers instructions. Positions are monitored daily and adjusted if market view changes or if the position values are adversely affected by market fluctuations, violating predetermined risk management criteria.

The Opes Way

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Investment Process: Trading decisions are based on filtering numerous trading tools including proprietary indicators, technical/sentiment indicators, market cycles and nearly 20 years of combined market experience. The Opes approach is to focus on risk management. The goal is 1-2% per month. Each position is between 5-10% of capital. The Trading Program’s Initial Margin to Equity ratio is 20%-25%. The Opes fees are 1% management, 20% performance, and each managed account has a $100K minimum. When trading we use spreads for all positions to limit our potential loss in a persistent negative market. This also helps mitigate gamma risk. We use low delta and strict position limits to counter risk.

Risk Management Protocol

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Puts and Calls are managed differently when measuring risk. Puts receive a lot more attention from a risk standpoint due to left tail risk that has plagued the market over the last decade. Three distinct “levels” of rules have been establish to manage the program risks:

• Hard and Fast – These rules are not to be broken and are non-

negotiable.

• Strict Guidelines – These rules have been established to guide the

program through fast and volatile markets. This category of rules is rarely bent and even more rarely broken. However, the portfolio managers do have ability to use discretion in rare instances.

• Rules of Thumb - This category is made up of guidelines designed to

make the decision making process as seamless as possible.

Risk Management Protocol

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Hard and Fast Rules:

• Strict limits on the number of call strikes that are to be shorted per $100k
• f equity at any given time.
• Strict limits on the number of put strikes that are to be shorted per $100k
• f equity at any given time.
• Strict position limits per strike for every $100k of equity size at any one

time for both puts and calls.

• Upon initiation of every short position, vertical calendar spreads are

utilized to lock in potential losses on a per position basis. All short calls & puts are covered in this fashion.

• Note: Historically put spreads have been initiated between 35-55

points (~ 1 standard deviation). However, larger spreads are not necessarily disallowed.

• Spreads are considered “Married” positions, the program does not

allow for the covering of only one side of the spread. Obviously a divorce can be approved for adjustments of the spread to manage risk.

• This policy insures a real hedge exists, not a speculative hedge.

Risk Management Protocol

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Strict Guidelines:

• Upon initiation of positions, strict delta limits are used to pick strikes.
• Positions are layered on from a time perspective, no more than 25% of

deployable capital is ever deployed in one trading day.

• Positions are spread throughout a 30-60+ point range affording the PMs

the ability to manage risk more effectively when the market moves in

• pposition to forecasts. This also provides a larger target success range

within any given trading window.

• Capital is not deployed on shorting both sides of the market within a

trading day.

• Typically an “Armageddon Hedge ” is placed on a quarterly basis to

achieve two goals:

• To serve as an substantial hedge (2x normal allocation) in the case of

a market “crash” with extreme tail loss.

• To potentially profit from a short term extreme sell off resulting in a

temporary volatility spike.

Risk Management Protocol

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Rules of Thumb:

• Position are spread over different expiration dates within a trading

window, i.e. using weekly and end of month expiration dates to manage risk.

• Trading windows of less than one week are avoided.
• Trading windows of more than 6 weeks are avoided.
• Upon initiation puts strikes are not to be closer than ninety points

from the current market.

OPTIONS/FUTURES TRADING CARRIES SUBSTANTIAL RISK NOT LIMITED TO ORIGINAL PRINCIPAL INVESTED. PAST PERFORMANCE NOT INDICATIVE OF FUTURE RESULTS.

Opes Capital Group, LLC Performance Results Since Inception

Opes Capital Group, LLC 9454 Wilshire Blvd., Suite 803 Beverly Hills, CA 90212 T: 310.247.8038 F: 310.388.3995 Joshua@opescg.com www.opescg.com