Opalesque Solutions

V4 - Volatility Trading Program

Quant Trading, LLC

Company Overview

Quant Trading LLC is a limited liability company engaged in the quantitative trading research and management of client and proprietary assets. Quant Trading LLC manages assets across currency, equity and commodity asset classes and related derivative instruments in the global markets for an international clientele. The investment strategies of Quant Trading LLC include quantitative currency trading (managed Forex), quantitative equity long/short and volatility trading.

Fund Strategy

V4 is basically a trend following, volatility trading strategy. It exploits the term structure (the contango and backwardation) of the VIX futures premium. V4 adjusts portfolio components on daily basis. The leverage (position value relative to the nominal account size) is less than or equal to 0.3, i.e. the strategy is underleveraged, in order to prevent disastrous drawdowns from overleveraged trading. Strategy returns are somewhat correlated with S&P 500 index returns. Since this strategy is not correlated to swing and trend following strategies on the S&P 500 index itself, it can be seen as an excellent complement to them.

Profit generation process
V4 - Volatility Trading Program attempts to extract profit from the price contango of VIX (S&P 500 volatility index) futures. Most of the time it trades the iPath S&P 500 VIX short-term futures Index tracking ETN (VXX) on the short side. In a slow market, the strategy trades no more than once a day. In a fast market, during periods of sharp market sell-off, the strategy uses stop loss orders. The strategy uses proprietary algorithm to identify contango condition in the VIX futures market. The strategy, through active portfolio adjustments, attempts to generate positive returns over time. The strategy is in the market almost 100% of time and daily rates of return are calculated on a mark-to-market basis. Trading is underleveraged (i.e. the margin amount is much lower than account balance) in order to keep the drawdowns at acceptable levels. The reported rates of return are achieved using the standard portfolio exposure (the 1X program). Higher absolute returns, with proportionally larger drawdowns, can be achieved by using increased leverage (1.5X or 2X version of the program) which is something that we do not recommend. Due to the relatively low margin requirements, partial account funding is possible.

Quick Facts

Category: Volatility Trading
Fund Launch Date: 2015-04
Monthly Performance Data:
Oct 0.87%

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