Managed Futures

THE FOLLOWING STATEMENT MUST BE READ AND AGREED UPON BEFORE ENTERING THE SITE

THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE FOLLOWING:

IF YOU PURCHASE A COMMODITY OPTION YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF ALL TRANSACTION COSTS.

RESULTS OF STUDIES CONDUCTED IN THE PAST MAY NOT BE INDICATIVE OF CURRENT TIME PERIODS OR OF THE PERFORMANCE OF ANY INDIVIDUAL CTA.

IF YOU PURCHASE OR SELL A COMMODITY FUTURES CONTRACT OR SELL A COMMODITY OPTION YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS OR SECURITY DEPOSIT AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUESTED FUNDS WITHIN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT.

MANAGED FUTURES MAY NOT NECESSARILY BE PROFITABLE UNDER ALL MARKET CONDITIONS AND ALSO MAY NOT NECESSARILY REDUCE VOLATILITY.

UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET MAKES A “LIMIT MOVE.”

THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A “STOP-LOSS” OR “STOP-LIMIT” ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.

A “SPREAD” POSITION MAY NOT BE LESS RISKY THAN A SIMPLE “LONG” OR “SHORT” POSITION.

THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY INTEREST 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 CUSTOMERS OF A CTA RECEIVE A DISCLOSURE DOCUMENT WHEN THEY ARE SOLICITED TO ENTER INTO AN AGREEMENT WHEREBY THE CTA WILL DIRECT OR GUIDE THE CLIENT’S COMMODITY INTEREST TRADING 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 THE LINKS PROVIDED UNDER EACH OF THE RESPECTIVE CTAS. 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 WILL ALSO BE PROVIDED TO YOU AT NO ADDITIONAL COST. THE CFTC HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN ANY OF THESE TRADING PROGRAMS NOR ON THE ADEQUACY OR ACCURACY OF ANY OF THESE DISCLOSURE DOCUMENTS.

OTHER DISCLOSURE STATEMENTS ARE REQUIRED TO BE PROVIDED YOU BEFORE A COMMODITY ACCOUNT MAY BE OPENED FOR YOU. THIS MATTER IS INTENDED AS A SOLICITATION.

THIS MATERIAL MAY MENTION SERVICES WHICH RANK THE PERFORMANCE OF COMMODITY TRADING ADVISORS.  PLEASE NOTE THAT THE RANKINGS APPLY ONLY TO THOSE CTAs WHO SUBMIT THEIR TRADING RESULTS.  THE RANKINGS IN NO WAY PURPORT TO BE REPRESENTATIVE OF THE ENTIRE UNIVERSE OF COMMODITY TRADING ADVISORS.  THE MATERIAL IN NO WAY IMPLIES THAT THESE RESULTS ARE OFFICIALLY SANCTIONED RESULTS OF THE COMMODITY INDUSTRY.  BE ADVISED THAT AN INDIVIDUAL CANNOT INVEST IN THE INDEX ITSELF AND THE ACTUAL RATES OF RETURN FOR AN INDIVIDUAL PROGRAM MAY SIGNIFICANTLY DIFFER AND BE MORE VOLATILE THAN THE INDEX.

ADDITIONAL DISCLOSURE REQUIRED FOR ADMINISTRATIVE FEES:

A COMPLETE DISCUSSION OF FEES AND CHARGES ARE REPORTED IN THE CTA’s DISCLOSURE DOCUMENT. SPECIFICALLY, ONE SHOULD RECOGNIZE THAT AN INTRODUCING BROKER MAY CHARGE A FRONT-END STARTUP FEE OF UP TO 3% OF THE INITIAL TRADING CONTRIBUTION. PLEASE NOTE THAT THIS CHARGE IS NOT REFLECTED IN THE PERFORMANCE OF THE COMMODITY TRADING ADVISOR AND COULD HAVE A SIGNIFICANT IMPACT ON THE CUSTOMERS ABILITY TO ACHIEVE SIMILAR RETURNS.

Episode 10 | How to Choose A Successful Money Manager

This episode discusses how to choose a successful money manager. Matt will go over what makes a money manager successful and how to determine whether or not a specific money manager is right for you.  With so many money managers out there, how do you narrow your selection to the one that best suits your needs? The key is to go beyond the returns and look for good risk management strategies combined with a disciplined investment approach.  Listen to episode 10 of the Optimus Futures Podcast to find more!

CLICK HERE to view a selection of Money Managers from Optimus Futures

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There is a substantial risk of loss in futures trading. Past performance is not indicative of futures results.

Episode Transcript

Read Episode Transcript

[00:00:01]

Welcome to the Optimus Futures Podcast a place to learn from an industry insider with over 20 years of experience in commodity futures and options. Gain insight to the newest technology, platforms, risk management, trading philosophy and advice about the current state of the futures and options markets. For futures trading platforms, deep discount trading commissions, overnight margins, and instructional videos. Feel free to visit our Web site optimusfutures.com.

[00:00:32]

Please remember that this matter should be viewed as a solicitation to trade trading futures and options involve substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Optimus Futures LLC is not affiliated with nor does it endorse any trading system, methodologies, newsletter, or similar service. We urge you to conduct your own due diligence.

[00:01:02]

Now heres your host, founder and CEO of Optimus Futures, Matt Zimberg.

[00:01:16]

Hi guys. This is Matt from Optimus Futures and today’s topic is how to choose a successful money manager. Part of what we do here at Optimus Futures is manage futures and in managed futures you have commodity trading advisors that are licensed managers. So we specifically deal in the area of futures however, the topic that I’m going to cover today how to choose a successful money manager are basic guidelines that I think would apply to every asset class out there. So let me start by saying that you need to choose a system. A money manager and a method that fits your risk tolerance. We’re going to go through a number of variables here that will help you and guide you. But first and foremost you have to choose an asset class. You have to choose an investment that will match your personality because you need to stick with it right. You don’t want to start and stop and go into another money manager and another asset class. So from the get go you want to be sure that you’re in the right asset class and the risk tolerance that you have in your as a person will actually match the investment that you are about to make. So having said that let’s start.

[00:02:38]

The first thing that you want to look at is obviously the returns. When you look at the returns you obviously want to make sure that those are returns that you are happy with because you have a number of alternatives for your capital. So you want to make sure that the money manager that you’re looking at the expectations as far as the reward that you’re about to receive also match some other things that you might do in your life and exceed that. For example you might have a business and it’s better reinvesting in the business you might have other investments that you’re looking at that are not necessarily have to do with liquid assets, will be a bit more long term or real estate or anything like that. So obviously you want to look at their returns that the money manager produces. The second thing that you want to look at is a strategy being used to generate those returns. Let me give you an example. So somebody could be a trend follower in the crude oil market or somebody could be trading the E-MINI S&P as a day trader. Somebody could be trading naked auction strategies or somebody could be trading agricultural commodities. Every single one of those things has a risk. So you have to understand the bottom line the risk that is being used in the strategy to generate those returns. Why is that important? You can go through years that are not volatile and then you can go through a few months that are extremely volatile that would adversely affect the investment or as I mentioned somebody could be trading in grain futures if we have some bad weather patterns or unpredictable weather patterns, well you know that might lead the investment in a totally different direction than what we thought from the first place so understand the risk.patterns, well you know that might lead the investment in a totally different direction than what we thought from the first place so understand the risk.

[00:04:33]

I tried to explain to customers what is the risk behind every strategy being used. And then we can mutually decide whether it’s for you or not. With every single person that should be like that whether the money manager or whether you have a broker or a financial adviser you need to understand what the underlying risk being taken with each one. And then you have to see if you’re comfortable with it for example somebody might say I’m okay with the day trading strategy. But I’m not okay with something which is susceptible to whether. This is just one example. The other variable that you should look at is the drawdown. Now here’s the thing. This is the not pleasant part of the investment. That’s when it goes against you. So you want to know looking at the history of the investment how far down did it go. That’s what a drawdown really measures how far down did the investor go and then you want to see how long did it take to recover. You might be OK with it or you might be not, but let me tell you this. Every single investor out there wants to maximize returns. But in terms of maximizing those returns you have to stick in my opinion with the investment long term.

[00:05:48]

So what happens in between is also important. You have to be okay with it. Let me give you an example, this is again hypothetical example, let’s say that you start with a hundred thousand dollars as an investment and let’s say by the end of the year you had a hundred and twenty five thousand. So that’s 25 percent return. Right. And that sounds very reasonable and very nice. However imagine one money manager using one strategy has gone down as much as $70,000. So he lost 30 thousand dollars before he recovered to made a profit and there’s another money manager for example that went down only 10 percent to achieve the exact same return. So now you’re kind of seeing the balance you’re looking for I hope you’re starting to see where I’m going with all of this that looking at the returns and maximizing returns is only one side of the equation you want to balance it out with again looking at the strategy. As we said the risk behind it and then look at the not nice periods which are the drawdowns and the fluctuations and see if you can withstand those periods you might realize that it’s not within your nature to wait six months or a year for investment to recover. So you might say okay this is not for me or you could say you know what if the money manager succeeds I’m okay with waiting. So again it’s up to you.

[00:07:10]

And another variable which I think is very important. And by the way I don’t want to give you an idea that all the variables that I’m talking about over here are the only ones. There’s a lot of micro variables out there so I’m just kind of giving you the big picture. Okay. And from there you can obviously look into more micro variables. So the next one is assets under management. Why is that important. There’s a lot of money managers out there that were very very successful in trading their own capital. But when it comes to trading other people’s capital and especially if they were successful in a lot of money coming in there’s a certain level of pressure. What is it? One is first of all dealing with bigger money and allocation of bigger money it’s bigger lots, it’s more to trade, more execution and that’s the administrative side all of a sudden that they have to take care of, or the execution side. The other part is also the psychological part not a lot of people can really handle trading other people’s money. The thing that can but the pressure gets to them. Because there’s all of a sudden discussions with brokers, discussions with customers, discussion with all those people that obviously are looking at them right now and reviewing their performance so you could be an amazing self directed trader and all of a sudden you go to the period of managing capital and you might say OK this is not for me.

[00:08:37]

And you also have to look at the assets that they manage. Right. So typically for a commodity trading adviser I would say you want to look at at least a 10 million dollar mark. This is basically you know what I would be looking for. Not to say that somebody with less than that will not be successful, but if you have some sort of a benchmark that would be a nice benchmark to go off from. Also what you want to see is the length of the track record. That’s really important. The more the money manager experiences the better it is. And specifically you want to look for the bad years. How did he handle the bad years in the business? Not to say that the good years are taken for granted, but when somebody can handle a bad year it definitely should, in my opinion, boost your confidence a little bit and say OK he could potentially do better. Maybe he did not. Maybe he didn’t have a positive return but maybe he didn’t have a very negative impact because he reduced positions he didn’t trade as much. He recognized that that’s not a good period to trade. So the way people handle bad periods is extremely important.

[00:09:54]

The next one is the expenses involved. You have to know how much money you are paying and for what. Because at the end of the day you can have a few good years that look amazing and the expenses could be high and you don’t pay attention to this. But then all of a sudden the market becomes lackluster and flat and all of a sudden all those fees are starting to come and you specifically are feeling. So for, example money managers such as commodity trading advisers they take yearly management fees. Then you have incentive for. And obviously the commission to us the brokers as we charge on a per transaction basis. You have to see that this is all reasonable right. You have to look at the bottom line expenses. Money managers that have a, I would say above normal, and i’m not going to define what normal is here you will define because you can use different benchmark, but if they’re above normal returns then you have to see also the expenses that are involved.

[00:10:45]

The last thing which a lot of you might be surprised that I’m even saying that, but I think it’s so important. It’s the attitude attitude of the money manager this is extremely important. Why is it extremely important because attitude also dictates attitude towards risk. When I ask a money manager how do you manage risk. I expect a very lengthy answer of how the risk management is being implemented and if it’s a short answer and it’s something that’s has specific rules and this is how it’s implemented and why is it so important from an attitude standpoint because the markets do not reward arrogant people they just don’t. Arrogance is a weakness in the marketplace and if somebody is very arrogant they most likely will not succeed. And what do I mean by arrogant? Arrogance sometimes does not mean that they don’t understand the risk involved but they might persist because of the ego to be in a losing position for a long time or might develop an opinion and be so stuck on it that nothing will change their mind. They’re just a one direction type of thinking. So what you’re looking for is good attitude flexible and pleasant to deal with.

[00:12:12]

is only deal with the risk capital. Remember best performance is not indicative of future results. It’s actually never indicative of future results and rich futures trading involves a substantial risk of loss. If you have any questions I’ll be more than happy to answer them. If you want to look at some money managers that I’m looking at I would be very happy to guide you as well. You can send us an e-mail general@opimusfutures.com you can dial 1-800-771-6748. Or you can call locally 561-367-8686. I hope you enjoyed the podcast and I’ll see you on the next one.

[00:13:21]

Subscribe to our podcast on iTunes, SoundCloud, and Google Play. You can also find us on YouTube, Facebook, Twitter, and Google Plus all under the username Optimus Futures. If you have any questions feel free to send us an email to support@optimusfutures.com or give us a call directly at 561-367-8686 or toll free at 1-800-771-6748. Once again thank you for listening to the Optimus Futures Podcast.

[00:13:51]

Please remember that this matter should be viewed as a solicitation to trade trading futures and options involve substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Optimus Futures LLC is not affiliated with nor does it endorse any trading system, methodologies, newsletter, or similar service. We urge you to conduct your own due diligence.

 

 

 

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