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About Global Sigma Group, LLC
Summary: The Global Sigma Plus trading program is an S&P 500 futures and options program that generates returns primarily through sale of options and hedging with Futures in certain scenarios. Products traded are one of the most liquid assets in the world. Trading is based on proprietary directional and volatility prediction models in order to achieve best risk rewards. Positions are all short term and option expiration time frame is generally less than 6 weeks. Currently the CTA filed Exemption 4.7 so this program is only available to QEP investors. Minimal account size is $250k. There is no Draw Down so far. Current fee is 2X20 and high water marks are used. There is no lock up period. Currently the program only trade E-mini option contracts and may move to the pit option contracts in the near future. The program executes roughly 7500 E-mini or 2500 Pit round turns per million per year.
From GSG Ddoc:
GSP mainly trades S&P 500 futures and options on futures contracts. The program typically will sell options on S&P 500 futures and sometimes will also hedge them with S&P 500 futures. The trade decision process typically has 3 steps.
1.Since the market is not entirely efficient, proprietary quantitative models will identify short-term market conditions based on historical data of price, volatility matrix, option chain and pattern matching techniques. The program will typically sell puts at local bottom, sell calls at local top or sell strangles during range-bound markets. Under certain conditions, the program may also trade futures directly.
2.When trading options, the models will find out the best strikes to sell in order to get best risk/reward ratio.
3.The program will look at current market bid ask price and compare with historical scenarios to generate an option trade signal.
In general most options traded will expire worthless. However, option selling is not necessarily a winning strategy since the small amount of losing trades by selling options may cost more than all the premium combined from expired options traded. GSP is not a pure volatility-selling program. It is a directional prediction program combined with a volatility measure. The program will typically trade option within 6 weeks to expiration. The program may also buy back options before expiration in order to reduce risk or wait for better opportunities. GSP continuously monitors the risk/reward ratio on both potential and established positions.
Since GSP usually sells options, a drop in volatility after a position is established is usually more favorable to the program (given all other things unchanged). However, this does not mean the program will lose money when volatility is rising or the market is trending. In certain scenarios, GSP will benefit even more in a trendy or volatile market when its direction prediction is correct. When market is more volatile, GSP may adjust with the market conditions and use less leverage ratio to reduce volatility risk.
There are three approaches GSP will use when market acts differently than expected.
1. The program may simply close out the positions and remain in cash. Most of the time, we find that simply admitting the models were incorrect and cutting losses quick is the optimal solution. This scenario typically happens when expirations are still quite away and the position hits a draw down limit specified by the program.
2. The program may hedge the position with S&P 500 futures. This typically will happen when the program still believes the option will expire worthless or the program believes the options premium is too high and hedging is more profitable.
3. Third, it may roll over the position or hedge it with another option. This will depend on relative value of different options with different expiration or strikes prices.
We believe this program will be mostly suitable for investors who are seeking an alternative return or diversification, which has the potential to gain consistently over time. We also believe that this program is a great complement to trend followers and other systematic strategies.
