Article by Emiko Terazono
Financial Times
Sign up
for our
Monthly
Newsletter!
October 2014
RCM Events
2-4
Upcoming CTA Panel Event: Miami, FL & RCM News
CTA Panel Event Wrap-Up: Dallas, TX
Managed
5-9
Paul Rieger - Manager’s Corner (Golden Point Capital)
Matthew Bradbard - CTA Vetting Process
Agriculture
10 - 12
Doug Bergman - Monthly Wrap-Up - September 2014
Matthew Bradbard - Uncertainty Presents Opportunity:
Cotton & Other Niche CTAs
Market Psychology
13
Denise Shull - The Two Thinking Styles of Great Traders
More Expensive Cup
of Coffee?
Beans Soar
to two and
a half Year
High
14 - 17
Energies
Greg Adamsick - More than Just Seasonal Factors
Jack Malone - Crude Oil - Brent and WTI Moving Lower?
Trading
18 - 20
Adam O’Dell - Trend-Followers Walking Tall After Q3?
All Markets
21
Matthew Bradbard - Monthly Review - September 2014
Cover Story
Alexandra Wexler -
By Alexandra Wexler
wsj.com
22 - 23
More Expensive Cup of Coffee? Beans
soar to 2 1/2 year high
By
Article Preview
Uncertainty Presents
Opportunity:
Cotton & Other
Niche CTAs
Monthly
Grain Update
RCM Dallas Event
TrendFollowers
Walking
Tall After Q3?
RCM Life
Events
CTA Vetting
Process
Upcoming RCM Panel Event: Miami, FL
RCM Cocktail Reception and Panel
Event: Miami, FL
Save the date! RCM Alternatives Cocktail
Reception & Panel Discussion sponsored
by Compliance Supervisors International,
KCG & Millennium Trust Company:
December 10th, Miami, FL.
Our first panel will be represented by:
A Panel Discussion On:
Our second panel will introduce attendees to four
niche managers:
How to Access Commodities through Managed Futures
Earn 2 hours worth of Continuing Education Credits by
attending this event. RCM Asset Management is a CFP
Board-Registered CE Sponsor!
Why attend this event? Learn more about the benefits of
Managed Futures, including:
Non-correlation to traditional asset classes
Diversification
The ability to equip traditional portfolios with crisis alpha
An important tool for hedging
Access to an actively managed asset class
Bobby Schwartz (RCM Alternatives)
Matt Nitschke (Millennium Trust Company)
Joseph Mazza (Compliance Supervisors International)
(Fourth Panelist TBA)
Auctos Capital Management LLC (Kevin Jamali)
Certeza Asset Management LLC (Brett Nelson)
Protec Energy Partners LLC (Andrew Greenberg)
Third Street Ag Investments LLC (Chad Burlet)
Cocktail Reception & Panel Details:
4:30 – 5:00 p.m. – Check-in
5:00 – 5:45 p.m. – First Panel
5:45 – 6:30 p.m. – Second Panel
6:30 – 7:00 p.m. – Q&A
7:00 – 8:00 p.m. – Networking Cocktail
Reception
RSVP NOW
ring
Now offe ing
Continu on
Educati !
Credits
RCM Alternatives - Monthly Research
Eden Roc
4525 Collins Avenue
Miami Beach, FL 33140
2
RCM News
RCM News
My first Steelhead!
RCM’s Paul Rieger, Executive Director of
Managed Futures & Alternatives, caught
his first Steelhead last month on September
5th in Baldwin, Michigan.
Hero in Training
We are very proud to announce Kurtis Kerstein from RCM Wealth
Advisors will be participating in the Chicago City Marathon this
October. He will do whatever it takes to raise money for Mercy
Home for Boys & Girls to help children in need.
Please help Kurtis reach his goal to
help these children in need by giving
a donation to this great cause!
Help Kurtis
GO KNIGHTS!
Jack Christie, 12, son of RCM’s Tracy Christie is
shown here in his winning form, scoring a goal
for the St. Jude Knights, GO KNIGHTS! Click
play to watch him score!
Knights: 2
Blues: 1
Tracy is an enthusiastic hockey mom that spends
her weekends with her sons’ hockey team and
brings a winning attitude to her work during the
weekdays at RCM.
RCM Alternatives - Monthly Research October 2014
CTA Event Wrap-Up: Dallas, TX
RCM Cocktail Reception & Panel
Event: Dallas, TX – Sept 18th, 2014
In partnership with CME Group, KCG Futures,
McGladrey and Millennium Trust Company, RCM
Alternatives hosted its sixth educational panel
event on Managed Futures on September 18, 2014
in Dallas, TX. Building on previous successful
events in Chicago, Louisville, San Francisco,
Denver and Charleston, RCM Alternatives took
to Texas in September to introduce attendees to
four niche Managed Futures programs: Bay Hill
Capital Advisors LLC, Four Seasons Commodities
Corporation, Protec Energy Partners LLC and Red
Rock Capital LLC.
While Managed Futures constitute an established
alternative asset class, a key focus of the event lay on
educating investors, including RIAs, family offices
and high-net-worth individuals, on the importance
of adding a level of diversification, non-correlation
and crisis-alpha to traditional portfolios through
an investment in the Managed Futures space. In
recognition of the educational content provided,
RCM Alternatives has recently become a CFP boardregistered Continuing Education sponsor. At all of
our events on Managed Futures, event attendees
are able to earn 2 hours worth of Continuing
Education Credits. In Dallas, our panelists
highlighted the benefits of allocating directly to a
diversified portfolio of Managed Futures programs.
In addition, the discussion focused on highlighting
key differences between the programs presented,
including exposure to a diverse set of markets. Both
Four Seasons Commodities Corporation and Red Rock
Capital LLC described how they traded lean hogs this
year despite the fact that one program predominantly
relied on fundamental analysis to focus on this market
when the other considered technical factors. The event
also focused on more pragmatic aspects of investing
in Managed Futures, explaining how the space can
be accessed using IRA funds, the rules dictating how
performance figures are calculated and the vetting
mechanisms available to investors. We look forward to
hosting our next free Managed Futures panel event in
Miami, FL on December 10, 2014 and we’d love to see
you there! RSVP here - space is limited!
RCM Alternatives - Monthly Research
4
Managed
Manager’s Corner
By Paul Rieger, Executive Director of Managed Futures & Alternatives, RCM Alternatives
In this month’s Manager’s Corner Update, we have Golden Point Capital answer our “25 Questions Every Investor Should
Ask”. Plus get the latest rankings from Barclay Hedge and sign up to receive our Managed Futures Kit.
Golden Point Capital Management’s investment objective is to achieve superior absolute returns by utilizing a proprietary
trend trading strategy which tracks numerous commodities across multiple markets, both domestic and foreign. Golden
Point Capital’s trading strategy is entirely systematic, utilizing mathematical models to enhance all aspects of the trading
model. Golden Point Capital takes pride in the research and ingenuity it has used in developing all aspects of its proprietary
trend trading strategy.
Click here to access the performance capsule for Golden Point Capital’s CTA Program.
1.) What is the name of the program/programs and
who are the listed Principals?
Golden Point Capital Management, LLC’s Global
Systematic Program
Principal: Glenn J. Graham, CAIA
2.) Can you provide us with some details of your
corporate background?
Glenn Started working in algorithmic trading as a
Quantitative trading analyst at Allston Trading, LLC
in 2006. He was soon promoted to running Allston’s
Metals Trading Desk. In 2008 He was honored by
Trader Monthly Magazine by being voted by his peers
and colleagues as one of the top 30 traders under 30
years old. After working at Allston trading, Glenn
Joined Trans Market Group In Chicago as the Director
of energy Trading, where he continued to develop
algorithmic futures trading strategies. He then Joined
Blue Fire Capital, LLC in Chicago as the Director of
Energy trading. After his time at Blue Fire, Glenn
started Golden Point Capital and has been committed
ever since.
RCM Alternatives - Monthly Research
3.) Who are the Principals with trading authority?
Glenn J. Graham, CAIA
4.) Can you provide details on the principal and/
or managers’ education, career and trading
background?
Glenn has been an Associated Person and Registered
Principal of the General Partner since March 8, 2012.
Glenn has had extensive experience in quantitative
trading strategy development in the futures space.
He holds the designation of Chartered Alternative
Investment Analyst (CAIA), a designation focusing on
the alternative asset classes.
Glenn began trading stocks when he was 15 years old,
trading in a custodial account set up by his father. Ever
since placing his first trades he has been passionate
about markets and trading strategy development. In
college, Glenn continued trading stocks as well as
options. While studying finance at the University of
Illinois in Champaign / Urbana, Glenn obtained a
position with the Business and Economics library.
While working there he studied trading strategy
October 2014
Managed
development and theory extensively in his free time.
In 2006, Glenn took a job as a quantitative trading
analyst on the metals trading desk at Allston Trading,
LLC in Chicago, where he was introduced to trading
futures markets. Glenn was soon promoted to running
Allston’s energy and commodity trading desk at 22
years old. In March 2008, Glenn spoke at the Dubai
Mercantile Exchange’s first symposium about electronic
energy trading.
In August 2008, he was honored by Trader Monthly
Magazine by being voted by his peers and colleagues
as one of the top 30 traders under 30 years old. After
working at Allston Trading, Glenn joined Trans Market
Group in Chicago as the Director of Energy Trading,
where he continued to develop algorithmic futures
trading strategies.
He then joined Blue Fire Capital, LLC in Chicago as
the Director of Energy Trading, where he continued to
develop quantitative trading strategies in the commodity
space. Glenn has been invited to speak at and has
participated in several other quantitative trading panels
throughout his career, most recently participating in a
Quant Invest forum in Chicago.
the markets we monitor will have to change if we were
to surpass $100MM.
10.) When did you start trading this program?
July 2012
11.) What type of accounts do you manage?
We manage single accounts as well as a pooled CPO
Account.
12.) Can you give a brief description of your
program?
We offer investors a long term trend following program
that is 100% mechanical in nature. We are a single
strategy CTA.
13.) Do you have a systematic or discretionary
approach to the market and what are your
program goals?
NAV Consulting Inc.
We are a completely systematic and use an entirely
algorithmic based approach to trading. Decisions are all
formulaic in nature and do not require any discretion.
Our program goals are to help investors capture the
potential rewards that can come with investing in
a trend following program, without the excessive
drawdowns associated with such strategies.
6.) What is the minimum investment for your
program?
14.) What is the average holding period for each
trade?
$250,000
Average winning trade is 60 days, average losing trade is
30 days.
5.) Which firm calculates your performance
numbers?
7.) Do you accept notional funding?
Yes
15.) Do you trade options within your program? If
yes, please describe the types of options traded
and how options risk is monitored.
8.) What is your management and incentive fee
structure?
No options are traded.
Management fee- 2% annually assessed monthly
Performance Fee- 20% assessed quarterly
16.) Are there any liquidity constraints in the
markets you trade?
9.) What is your program’s capacity?
The markets that we trade go through rigorous filtering
to make sure that liquidity risks don’t pose a threat
to the sizes that we trade. We are never a substantial
We believe that we have virtually unlimited capacity, but
RCM Alternatives - Monthly Research
6
Managed
portion of total open interest in any given month or
market.
17.) In what types of market environments does
your trading program do well and /or struggle?
We tend to do really well in high volatility trending
markets. And not as well in non trending low volatility
markets. Although the name of the game is that one
big trend will pay for them all, so if a big trend arises
we aim to capture it. We can not and do not aim to
predict when trends occur, we just aim to capture them
when they do occur.
18.) What is the standard range of margin to
equity usage for the program and how long do
you hold the average trade?
A fully invested account is around 25%. This takes
some time to get to as a new SMA only takes on new
trade signals, we don’t just enter everything on day one
as our goal is to keep drawdowns from initial equity
to a minimum. Average holding winner is 60 days,
average loss is 10 days.
19.) How do you manage risk/reward and what
metrics are employed?
We use many different means to manage risks. We
position size based on volatility and use hard stops.
These stops are periodically adjusted using our
proprietary market exposure reduction algorithm
which is monitored and updated on a daily basis.
20.) What are the optimal market conditions for
your strategy?
Ideal markets are low volatile markets that are just
about to become volatile and start trending, although
we make no claims to be able to predict this, but we
are prepared when conditions switch, and our risk
management techniques make sure of this.
21.) Describe your worst drawdown to date, how
did it happen and what actions have been taken
(if any) to prevent similar drawdown’s?
well within the confines of our statistical modeling
so we have done nothing to alter how we deal with
drawdowns. Our risk management is designed to
account for changes in equity and as such will not be
modified in times of drawdowns.
22.) What are your investment goals?
To achieve superior absolute returns by utilizing
a proprietary trend trading strategy which tracks
numerous commodities across multiple markets, both
domestic and foreign.
23.) What makes your program unique and
different from other managers in your sector?
We come from an algorithmic trading background,
and have spent countless hours working on adding an
element to our system that helps keep drawdowns from
peak equity to a minimum. A lot of trend following
programs will pyramid into positions thereby increasing
volatility, we don’t do this and yet we still are able to
show similar if not superior returns.
24.) Do you feel you have an edge if so what is it?
Our edge is largely in our risk management. This
includes how we position size, how we enter hard stops,
how we adjust stops and how we view risk individually
and on a portfolio wide basis. The summation of all
these various pieces of our risk management is what we
call our portfolio exposure reduction algorithm.
25.) What is the one piece of advice that you
would give to a new start-up CTA?
I would say have a plan and stick to it. Have faith in
your model and in yourself.
To learn more about Glenn Graham’s trading program
Golden Point Capital, contact Paul Rieger at:
Paul Rieger
Executive Director of Managed Futures & Alternatives
23.02% was our worst drawdown so far. This is
312-870-1512 / prieger@rcmam.com
RCM Alternatives - Monthly Research
October 2014
Managed
CTA Vetting Process
By Matthew Bradbard, Vice President of Managed Futures & Alternatives, RCM Alternatives
Before hiring a new Commodity
Trading Advisor (CTA), conducting
a thorough and diligent review of
the program at hand is perhaps the
most important step in diversifying
into Managed Futures. I encourage
all of my clients to properly look
under the metaphorical hood
of every CTA on their radar as one would with
any investment. It is important to get comfortable
with virtually every aspect of the CTA’s business to
maximize the chances of the investment decision
being a profitable one. Consider the CTA’s trading
strategy, risk management approach, key personnel
and edge as those four factors are most critical to any
program’s ultimate success.
Key factors to consider when conducting CTA
due diligence:
Trading Strategy: Before investing in a CTA
program, come to understand its trading strategy.
While text descriptions may be nice, they are not
always illuminating. Look at the numbers. Request
a range of trading records that you deem relevant,
including past monthly statements, performance
records and the program’s disclosure document. Do
this not only for the program that the manager is
currently trading but any other past trading accounts
where he/she had power of attorney. In examining a
CTA’s performance history, look at both significant
upward and downward spikes and have the manager
explain the market conditions and reasons behind
both. For programs registered in the United States,
use the National Futures Association’s (NFA) search
tool available from the Background Affiliation Status
Information Center’s (BASIC) section of its website
to determine the CTA employment history, if they
ever changed names or are currently exempt from
registration. If yes, follow up with the manager to
find out why. As you go through the records, try
to ascertain if there have been significant changes
to the program’s trading philosophy, and find out
RCM Alternatives - Monthly Research
what caused the shift, if any. Two examples include
changing from a systematic to a discretionary approach
and introducing options on futures to a strategy that
previously was futures-only.
Risk Management: Once you have a better
understanding of a CTA’s underlying trading strategy,
verify that there is a solid risk management program in
place. In the commodity trading world volatility can be
a good thing so do not rule out a program based simply
on large performance swings so long as they are both
to the up and downside. In vetting CTAs I often prefer
the Sortino ratio to the Sharpe ratio for this reason.
While the Sharpe ratio illustrates how well the return of
an asset compensates investors for the risks they have
taken on, the Sortino ratio is a little bit more nuanced
since it differentiates between good and bad volatility.
In separating up and downward volatility, the Sortino
ratio provides a risk-adjusted measure of a program’s
performance without penalizing it for upward price
changes. As a potential investor, make sure you are
comfortable with the worst drawdown endured by the
CTA to date since history may not repeat itself but it
certainly rhymes. Make sure also that you view your
8
Managed
Managed Futures investment in the context of your
overall portfolio. Viewed in isolation, CTA investments
look aggressive due to the higher risk/reward ratio
but put in proper context, they have the potential to
diversify and hedge more traditional asset holdings,
providing non-correlated alpha.
Personnel: While this may seem old-fashioned, I often
encourage clients to meet CTA managers in person,
preferably on-site and unannounced. CTA investments
are actively managed programs with real personnel
behind them and it helps to get a feel for the individuals
in charge of trading your funds. Inquire about
managers’ regulatory and employment records to date.
Consider reaching out to the CTA’s past and present coworkers, clients, and third party service providers such
as accountants, auditors and lawyers.
Edge: Try and pin down, in a concise manner, what the
CTA’s edge is. Ask the manager to do the same in as few
words as possible. Chances are that if a manager cannot
describe his/her program’s edge, there is none. This may
be especially true for discretionary programs.
Ask the CTA if he/she has his/her own money
invested in the program. While not essential, this
is a great revealed preference.
Be sure you fully understand the CTA’s trading
strategy, including when trades are entered/
exited, how long trades are held for on average,
what the margin to equity ratio is and the reasons
behind significant ups and downs. How does the
CTA conduct market research to identify trading
opportunities?
Be clear on the CTA’s approach to risk
management.
Remember, if something sounds too good to be true
it likely is. Go with programs where everything adds
up: be sure the performance data and any qualitative
feedback are in sync. Ask lots of questions; if you aren’t
getting satisfactory answers – walk away.
While investors’ needs vary, thorough due
diligence should always cover some basic points:
For CTAs registered in the United States, use the
NFA’s BASIC search tool to find out how solid a
manager’s regulatory and employment track record
really is. Look into third party service providers
used by the CTA, including lawyers, auditors and
accountants. Use the Financial Industry Regulatory
Authority’s (FINRA) Broker Check search tool to
find out background information on managers who
may also be active in trading instruments other
than futures and options on futures.
Request a range of trading records, including
past monthly statements, performance records,
marketing materials and the program’s disclosure
document. Differentiate between hypothetical and
actual performance.
Using the disclosure document, find out how
the CTA is getting compensated. There may be
conflicts of interest if they earn income from
sources other than management and incentive fees.
Keep in mind that it’s sometimes necessary to prove
the negative as well as the positive. The vetting process
should be vigorous and should not be taken lightly; it is
essential for making informed choices in the Managed
Futures space.
To learn more about the ideas discussed above, contact
Matthew Bradbard at:
Matthew Bradbard
Vice President of Managed Futures & Alternatives
312-870-1653 / mbradbard@rcmam.com
RCM Alternatives - Monthly Research
October 2014
Agriculture
Monthly Grain Wrap-Up
By Doug Bergman, Vice President of Agricultural Derivatives, RCM Alternatives
Corn: Corn
continued its
decline during
the month of
September as early yield reports
out of the Midwest continued
to impress. The main focus of
the corn market is on plentiful
supplies, and that is keeping
buying interest away from the
market. The market is expecting
record yields, and I think traders
have done a good job of pricing
oklahomafarmreport.com
that in. Moving forward, there
relationship between the two commodities returns to
should be good demand for corn; however until
a more normal level.
the threat of demand exceeding supply abides,
corn should have a hard time putting in a
Wheat: Wheat also trended lower during the month
meaningful rally. Regardless, from current price
of September as building supplies around the world
levels, I think there is limited price risk to the
led to speculative selling in the wheat market. The
downside and think the better strategy may be
increase in strength in the US Dollar was a further
to wait for a buy signal to eventually get long
negative input, rendering the world market a more
corn.
competitive environment for US wheat. Due to
growing world supplies, wheat will need to price
Soybeans: Soybeans also spent much of the
itself competitively as a feed grain which, I believe,
month of September trending lower with prices
means prices could be very strongly correlated to
reaching multi-year lows by the end of the
the corn market moving forward. Given that, I don’t
month. In a similar fashion to corn, with beans
think there is a huge amount of downside risk from
too much of the focus has been on the record
current price levels, but I do think wheat will be hard
crop that is being harvested currently and the
pressed to rally unless corn starts to see some price
huge supply that will emerge as a result. The
appreciation.
main difference between corn and beans, in
my opinion, is how future production will be
Should you wish to discuss any of the ideas above,
affected. While current corn prices will likely
don’t hesitate to contact Doug directly at:
discourage future production, it looks like the
opposite will be the case with beans due to their
Doug Bergman
higher price relation to corn. For this reason,
Vice President of Agricultural Derivatives
I believe beans have downside risk until the
312-870-1503 / dbergman@rcmam.com
RCM Alternatives - Monthly Research
10
Agriculture
Uncertainty Presents Opportunity:
Cotton & Other Niche CTAs
By Matthew Bradbard, Vice President of Managed Futures & Alternatives, RCM Alternatives
Commodity Niche CTAs
Not unlike many other
commodities, Cotton prices too
have been depreciating over the
past four to six months. As can
be seen below, December Cotton
Futures are hovering just above
5-year lows, finding support near 61 cents in recent
weeks. High (5/8/14) to low (9/25/14), Cotton prices
have lost 27.5%; but is the selling over? As this article
goes to press (10/7/14), the trend line that has been
in place for the last five months is being challenged.
While it is too early to judge whether the bear market
in Cotton is over for now, I do believe that if this
trend line is violated we could see short covering and
fresh buying push Futures back above the 70 cents
level (38.2% Fibonacci level) and I would not rule
out a return to 73 cents (50% Fibonacci level) either.
Importantly, as of 10/7/14, Futures have been posting
gains for the last three consecutive sessions while
making higher highs and higher lows for the past five
sessions.
The 800 lb. Gorilla:
China represents the largest Cotton consumer globally
with increased mill use and apparel production in the
land of the red dragon only underscoring this role.
With the US concurrently booking losses in domestic
mill usage, there is no doubt that Cotton prices have
become very sensitive to developments in China.
Or to put this another way, as China sneezes, we all
catch a cold. To some extent the current dynamic in
the Cotton market allows China to corner the market
and control prices. There has been very little change
with regards to World Trade Organization (WTO)
rules over the past five to ten years even though the
influence China has over prices has continued to
grow. To put this into context, consider this: since
RCM Alternatives - Monthly Research
2001 when China acceded to the WTO, China’s Cotton
consumption has grown by more than 10M bales, while
US mill usage has declined from 11M bales to 4M bales.
Whenever one country or region has excessive
influence over the prices of any one commodity, it can
make for an unpleasant situation. Take, for example,
Frozen Concentrated Orange Juice (FCOJ) prices
and weather conditions in Florida, Coffee prices and
growing conditions in Brazil (think recent drought and
the related surge in prices) or energy prices and turmoil
in the Middle East, the latter being counteracted
somewhat by increasing energy independence in the
US.
Federal Program Increasing Uncertainty:
Uncertainty regarding the federal loan program is
further clouding the waters as we approach harvest.
While the most recent USDA estimate published during
the first week of October puts this year’s Cotton crop
nearly at 30% larger than last year’s crop, the $1 million
question remains how long it will take for new supplies
to hit the market. Larger supplies and slowing demand
from China – the importance of which I described
above - has significantly contributed to the dramatic
decrease we have seen in Cotton prices over the last
five months. But has the worst case scenario already
October 2014
Agriculture
December Cotton Daily Chart:
to add contrarian momentum to and
diversify traditional portfolios (including
stocks, bonds and real estate) according
to your individual risk tolerance, contact
Matthew Bradbard, Vice President
of Managed Futures & Alternatives, at
mbradbard@rcmam.com or
312-870-1653.
Source: www.dtn.com [accessed: 10/7/14]
been priced in? Just within the last 2 weeks, the
threshold that triggers US government loan repayment
assistance was crossed. For a moment, put yourself in
a farmer’s shoes or should I say boots: given current
price levels, wouldn’t you at least consider delaying
sales? Under the government program, Cotton farmers
can hold back their crop to see if there are greener
pastures ahead, waiting to see if prices will rebound in
the coming weeks or months. In trader speak, this is
the equivalent of a free call option.
There are a number of niche traders that RCM works
with that trade the softs complex. These markets may
not be scalable to very large Commodity Trading
Advisors (CTAs) that manage several billions of
dollars. While some have struggled, there are a number
of niche CTAs that have been able to produce alpha
over the last few months because of their trading
activity in the softs markets. This is in part due to
the market movements we have seen recently: look
to figure 2 and you will find that some of the best
performing commodities year to date and some of the
worst performing commodities over the same time
span can be found in the softs complex. Remember
that most CTAs have the ability to trade the markets
both long and short. Should you wish to learn more
about CTA programs with exposure to the softs
complex, and the ways in which they can be used
RCM Alternatives - Monthly Research
Source: www.finviz.com [accessed: 10/7/14]
RCM Database: Fun fact! Did you know that there are
currently 7 CTAs listed on our CTA Database that focus at
least 20% of their trading on the softs complex? Looking for
exposure to other niche programs? The database contains
sector specialists through which you can gain exposure to
programs that focus exclusively on livestock, agriculture or
energies, for example.
Click here to access
our CTA Database
12
Market Psychology
The Two Thinking Styles
of Great Traders
By Denise Shull, The ReThink Group
A variety of
research studies
conducted in
the past decade
reveal that great
trading stems
from qualitative,
not quantitative, thinking. Whether
watching the brain of someone
who is correctly reading price or
talking to someone who successfully
manages billions of dollars, the
researchers find the same things.
Market Intuition - a form of people
prediction and Risk Differentiation - a form of
self-knowledge, distinguish the great traders.
It’s not that quantitative data is irrelevant. It just
doesn’t hold the whole answer. Probabilities are
one clue and in fact, even looking at a distribution
of possible outcomes produces a qualitative
response in the human brain. A normal bellcurve induces a feeling of confidence whereas a
skewed curve produces greater anxiety. It’s called
anticipated affect and if you think about it, it
makes perfect sense.
According to the latest neuroscience, emotion
is not only NOT to be avoided, it “organizes
our memory and determines our perception”
(Brosch, 2012). This means it is a data point worth
investigating.
So -- how do you develop these qualitative
thinking styles to superimpose on your objective,
quantitative inputs? You first accept the idea that
you need to. Once you embrace these realities of
RCM Alternatives - Monthly Research
www.tonymaidment.com
risk decision making, you work on imaging who
exactly is on the other side of your trade or will be
on the other side of your future exit? Ask yourself
if everyone is seeing what you are seeing, will they
see it later or will they not see it at all?
In Risk Differentiation or self-knowledge, get to
know your emotional cycles as well as you know
your market cycles. This way you can separate
your impulsive feelings from your intuitive pattern
recognition - and have more of the first thinking
style, Market Intuition.
Click here to find out how you can access The
ReThink Group through RCM Alternatives!
Ruth Baerman
Relationship Manager
312-870-1567
rbaerman@rcmam.com
October 2014
Energies
More than Just Seasonal Factors
Pushing Gas Prices Lower
By Greg Adamsick, Vice President of Global Futures & Options, RCM Alternatives
Gasoline prices at the
pump at eight month lows!
Each fall US consumers
are greeted with similar
headlines due to seasonal
factors but this year is
setting up to produce an
even bigger drop in
prices. While futures prices may have already
factored in the seasonal aspects of supply and
demand, Gasoline demand has clear seasonal
patterns: higher demand in the peak summer
driving season and lower demand in the fall
www.bizjournals.com
as travel tends to abide. However, there are
but surely being replaced by Natural Gas. The latter has
other factors too, that we should look at in an
proven to be a cleaner and less expensive alternative,
effort to understand the energy markets. We have seen
tempering demand for Diesel Fuel and Heating Oil.
a substantial increase in Crude production levels here
This, in turn, frees up capacity to allow refineries to
in the US, driven chiefly by more advanced drilling
focus on other products such as RBOB. Reinforcing
methods (fracking) alongside declining world demand
this move towards Natural Gas is the fact that it is also
as the economies of the Eurozone and China show
being used increasingly in manufacturing machinery as
signs of weakness. Compounding these factors in
a cleaner substitute for Coal. These are just some of the
support of a push lower is the strengthening US Dollar,
dramatic developments we have seen characterize the
the currency in which most commodities are priced.
energy landscape in the US over the last couple of years.
Since Gasoline (RBOB) is a refined product of crude
Significant infrastructure investments were necessary
oil, it is directly affected by price moves in both WTI
to get us to this point but as sites come online, costs of
Crude and Brent Crude.
production go down, and so will prices.
As we move closer towards energy independence in the
US, we have managed to outpace Saudi Arabia for the
past 20 months in terms of total petroleum production,
including Natural Gas. Because of old laws related to
the oil embargo in the 1970’s that render exporting
Crude directly next to impossible, supplies are pushed
towards refiners who transform it into RBOB Gasoline,
Heating Oil, Jet Fuel and Kerosene.
Fracking is dramatically increasing the production of
Natural Gas which, in turn, is affecting the refining
products. Heating Oil and Diesel Fuel are very similar
and have been a staple for heating homes and powering
trucks for decades; however these products are slowly
The Dollar strength we have seen recently can perhaps
be best explained in terms of weakness in other key
currencies due to worsening economic conditions. Or to
put this another way, the Dollar is the least dirty shirt in
the laundry. Recently the International Monetary Fund
(IMF) cut its global GDP forecast for 2015 from 4%
to 3.8%, warning officials to step up and take action to
prevent a prolonged period of sluggish growth. Among
the key economies around the world, it is the slowing
Eurozone economy that has impacted the Dollar the
most, seeing how the Euro Currency is the most heavily
weighted currency in the Dollar Index.
RCM Alternatives - Monthly Research
14
Energies
As we have seen, a lot of the
fundamentals are pointing to lower
Gasoline (RBOB) prices, with the
technical picture on RBOB (RBX4)
looking bearish as well. Included
in figure 1 is a weekly chart of
the front month RBOB Futures
contract (currently November
2014), showing that the multiple
bottom low from November 2011
has been taken out. Should we get
a confirmation of a breakdown
below 2.40, the new objective to
the downside should be 1.82 in my
opinion – using the retracement
low from October 2010. Going by
my interpretation of the markets,
I see opportunity in shorting the
RBOB November 2014 contract in
Source: https://www.tradingview.com/e/dOhOKPYr/ [accessed: 10/8/2014]
front of 2.40, with
a stop at 2.46. For
market participants
uncomfortable with
being outright short,
there are a number
of option strategies
that can be employed
to better manage
risk.
On a related note,
as you would guess,
RBOB Gasoline and
Gasoline prices at
the pump are highly
Source: http://www.gasbuddy.com/gb_retail_price_chart.aspx?time=24 [accessed: 10/7/2014]
correlated. In my
opinion, once gas at
To follow up with Greg Adamsick about any of the ideas
the pump breaks below the 3.20 triple bottom low of
discussed above, e-mail or call:
the last four years, the next objective should be the
$3.00 mark. Economically speaking, according to
Greg Adamsick
Energy Information Administration (EIA) in the US,
Vice President of Global Futures & Alternatives
we use an average of 365 million gallons of Gasoline
312-870-1524 / gadamsick@rcmam.com
a day making each ten cent drop in Gasoline cost
worth some $36.5 million dollars or over a billion
Dollars a month in stimulus to the economy.
RCM Alternatives - Monthly Research
October 2014
Energies
Crude Oil:
Brent and WTI Moving Lower?
By Jack Malone, Futures & Options Advisor, RCM Alternatives
The US will soon become the world’s
largest producer of petroleum
liquids. On a per day basis, the US
has surpassed all other countries
this year, producing a staggering 11
million barrels of petroleum liquids.
This production has had a direct
effect on the world supply of oil
and, therefore, also on world pricing. Commodities
historically will follow an inverse relationship with
the currency in which they are priced. Take the recent
surge in the US Dollar, for example. It is putting
downward pressure on commodities.
emerging markets like Brazil. So to bank of continued
strong demand out of Europe and Asia may be a
questionable approach.
Since 2011 Brent Crude Oil has traded at a premium
to WTI Crude Oil, but I am looking at a number
of factors that will bring this spread back to parity.
The state of global geopolitics is certainly uneasy
currently as there is unrest in Iraq, Syria, Libya,
Russia and Ukraine to name a few. While the types
of conflicts we are seeing at the moment might have
once pushed energy prices sharply higher, this is not
happening now due to increased US production.
In fact, US oil production has increased some 70%
since 2008, significantly stabilizing world oil prices
and altering import/export relationships around
the world. Countries like Nigeria and Angola – who
have for years exported oil to the US – suddenly
find themselves with excess oil supplies that the US
no longer needs. As a result, these producers are
now being forced to sell to Asian markets at steep
discounts, bringing down the price of Brent overall.
While increased US production of oil is certainly a key
factor in driving prices lower, lower demand, too, is
compounding that effect. Germany released industrial
production figures on 10/7/’14, indicating the
biggest decline since August 2009. The International
Monetary Fund (IMF) cut its global economic growth
forecast for the third time this year, warning of weaker
growth in core Eurozone countries, Japan and big
Source: The Wall Street Journal [accessed: 10/7/14]
RCM Alternatives - Monthly Research
16
Energies
The Organization of the Petroleum
Exporting Countries (OPEC) is an
intergovernmental organization
whose mission it is to coordinate
the policies of oil-producing
countries. The goal is to secure
a steady income to the member
states and to collude in influencing
world oil prices through economic
means. OPEC consists of 12
countries, representing about 40%
of the world’s oil production, with
its most prominent member being
Saudi Arabia. In light of the recent
slide in energy prices, most OPEC
nations would like to stop the drive
lower by reducing production.
However, Saudi Arabia recently
cut prices for November exports
without consulting other member
countries, signaling no plans to
slow production.
Source: https://www.tradingview.com/e/OUYV2IHC/ [accessed: 10/7/14]
Recent strength in the US Dollar,
excess supplies, and lower global
demand are all factors that
combined to send oil to fresh lows. As of 10/6/’14, Brent
is trading at a 28-month low of 91.25 a barrel, down
from a peak of over $125 a barrel in early 2012. WTI
settled down 1.4% on 10/3/’14 at $89.74, the lowest
settlement since April 2013. US prices have fallen 16%
from their mid-June high. Market participants looking
to trade some of these insights can do so in many ways
other than simply getting outright long or short the
markets. Personally, I am looking for WTI and Brent
to trade at parity in the short term. The chart below
illustrates December ‘14 WTI vs December ‘14 Brent. I
am looking for the current trend to continue until Brent
and WTI have reached parity.
To follow up with Jack Malone about any of the ideas
discussed above, or if you would like to receive more
information, e-mail or call:
Jack Malone
Futures & Options Advisor
312-870-1568 / jmalone@rcmam.com
Click on the link to the left to watch CTA
interviews from our panel event discussion
in Denver, CO! More interviews from our
Dallas event coming soon
Meet more managers at our December
10th Miami, FL event!
RSVP NOW
RCM Alternatives - Monthly Research
October 2014
Trading
Trend-Followers
Walking Tall After Q3?
By Adam O’Dell, CMT, Chief Investment Strategist, Dent Research
Trend-following managers should
be walking tall following solid
performance in recent months.
More broadly, managed futures
programs posted their best
quarterly performance since 2008,
as the Newedge CTA Index was up
about 4.9% in Q3. But as I’ll show, I suspect the bulk
of those gains can be attributed to trend-following
programs that successfully captured fat-tail moves.
Of course, for the past several years naysayers have
postulated that trend-following strategies are broken
and will never again work. To be fair, these programs
have significantly underperformed in recent years
as central bank intervention has both dampened
volatility and increased correlations between typically
uncorrelated markets.
But if those calling for the end of trend-following are
right, they’d be forced to conclude that fat-tail moves
have disappeared altogether from financial markets.
And that’s a far-fetched conclusion. July, August and
September should act as a good reminder
that trend-followers’ fat-tail moves are not
a thing of the past. What’s more, in my
opinion, many of the markets that moved
big in September still have room to run.
and then counted the number of times in the past 10 years
that a move of that direction and magnitude had occurred.
Next, I ran Monte Carlo simulations on each market
to determine how many times over a 10-year period
we should expect to see, per my calculations, moves of
that direction and magnitude. Note: the Monte Carlo
simulations use each market’s historical returns (average
monthly return; standard deviation of returns) to simulate
a normal distribution. Based on this, I can quantify how
often a price move of a certain magnitude should be
expected, if returns followed a normal distribution.
Finally, I compared the two calculations: the “Actual”
frequencies versus “Expected” frequencies, per my
calculations. And this allowed me to identify which
specific markets made fat-tail moves. For instance, if the
Monte Carlo simulation suggested a 3% monthly return
should occur only five times in a 10-year period, but
September marked the 10th occurrence of a 3% return,
I would label the price change as a “fat-tail move.” Here’s
what I found:
Fat-Tail Moves: Defying
Expectations
I define a fat-tail move as largemagnitude price change that occurs
more frequently than would be expected
if the market’s price changes fit within a
normal distribution (aka “bell curve”).
To characterize the market moves seen in
September, I did some number crunching.
First, I noted the percentage gain/loss of
each market in the month of September
RCM Alternatives - Monthly Research
18
Trading
The U.S. dollar is a good example of a fat-tail move that
developed in September. By month end, U.S. Dollar
futures were up 3.8%. That was the ninth time in the
past 10 years that U.S. Dollar futures have gained 3.8%
or more in a given month. Yet, my interpretation of bell
curve statistics says that a move of that magnitude should
be expected only five times over a 10-year period. That,
in my opinion, is a “fat tail” move… a bigger move, more
often, than we should expect to see.
Wheat, Japanese yen, heating oil, corn, Australian dollars
and soybean oil also made fat-tail moves in September.
But most of the trends that prevailed in September began
a couple months earlier. So I extended this analysis
to include a 3-month rolling period, covering July –
September.
Over this time frame, fewer markets made fat-tail moves.
Notably, the U.S. dollar’s 7.66% gain between July and
September was within my calculated expectations, even
if it was the greenback’s best quarter since 2009. Still, on
a 3-month rolling basis, Japanese yen, corn, wheat and
heating oil made fat-tail moves.
These market moves should be a poignant reminder of
why trend-following programs can be a useful addition
to investors’ portfolios. Fat-tail moves do happen. They’re
incredibly difficult to forecast. Yet, some trend-following
programs have the potential to capture the moves and,
in doing so, provide important risk management and
diversification opportunities, especially in volatile market
environments.
Looking Ahead to 2014 Year-End
Following large 1- and 3-month moves, and strong
performance from trend-followers, skeptics may fear
the juice has been squeezed from these lemons.
I don’t expect trend-following strategies to lock in
profits and hibernate though year-end. Many of
these markets still have room to run, in my view.
First I took each market’s 3-month return and
determined the frequency of 6-month returns (of
the same direction and magnitude) over the past
10 years (actual frequency). Then I compared
that figure to the expected frequency (per by my
calculations) of 6-month returns of that magnitude
and direction (based on Monte Carlo simulations
using each market’s average monthly return and
standard deviation). Here’s what I found:
If the Japanese yen were to extend its 3-month loss
of 7.77%, through December, it would qualify as a
fat-tail move.
Meanwhile, for many of the markets referred to
above, I am looking for their prevailing 3-month
trends to continue further over the next three
months (no fat-tail move required).
Past performance is not necessarily indicative of
future results.
RCM Alternatives - Monthly Research
Click here to access
our CTA Database
October 2014
RCM Alternatives
Because of your relationship with RCM, you qualify
for a free 2-week trial to OptionWorks® Research.
Receive a daily strategy report and access an extensive database of volatility research on futures options.
Start your trial today to see how OptionWorks® can
benefit your trading.
No credit card is necessary for a 2-week trial.
An OptionWorks® subscription includes access to:
Daily Strategy Report
Covering 10 US Markets
Volatility Dashboard
Covering 40+ Markets
Option Calculator
For Risk Analysis
Start your free trial today!
*use Coupon Code RCMX11 when subscribing
Stay ahead of the game with a 4-week
free trial of CTA Intelligence Magazine.
Register today, and look out for monthly
contributions from RCM Asset Management.
RCM Alternatives - Monthly Research
20
All Markets
September Monthly Review
By Matthew Bradbard, Vice President of Managed Futures & Alternatives, RCM Alternatives
COMMODITY
ENERGIES
CRUDE OIL
HEATING OIL
RBOB
NATURAL GAS
LIVESTOCK
LIVE CATTLE
FEEDER CATTLE
LEAN HOGS
FINANCIALS
DOW
S&P 500
NASDAQ 100
RUSSELL 2000
DAX
NIKKEI 225
30-YR
10-YR
5-YR
EURO-DOLLAR (Z16)
CURRENCIES
EURO
AUSSIE
SWISSIE
LOONIE
CABLE
YEN
KIWI
US DOLLAR
GRAINS
CORN
SOYBEANS
SOYBEAN OIL
SOYBEAN MEAL
CBOT WHEAT
KC WHEAT
OATS
RICE
SOFTS
COCOA
SUGAR # 11
COTTON
COFFEE
ORANGE JUICE
LUMBER
METALS
GOLD
SILVER
COPPER
PALLADIUM
PLATINUM
OPEN
CLOSE
HIGH
LOW
MONTHLY CHANGE
YEAR TO DATE
94.90
2.6142
2.6199
4.10
91.16
2.6505
2.4373
4.12
94.94
2.8774
2.6347
4.18
89.56
2.6378
2.4209
3.81
-3.94%
1.39%
-6.97%
0.49%
-7.50%
-13.31%
-12.79%
-1.67%
151.85
217.40
98.90
159.90
235.43
107.98
161.75
236.18
108.75
151.75
217.38
98.75
5.30%
8.29%
9.18%
18.09%
40.56%
18.66%
16990
1961.00
4072.00
1170.00
9500.00
15425
140'02
125'24.0
118'25.5
97.9650
16965
1965.50
4044.75
1096.60
9490.50
16225
137'29
124'20.5
118'08.2
97.7950
17279
2014.50
4118.75
1182.20
9817.00
16455
140'04
125'24.5
118'27.7
98.0450
16839
1955.50
3998.00
1094.10
9405.50
15400
135'13
123'16.0
117'21.0
97.8800
-0.15%
0.23%
-0.67%
-6.27%
-0.10%
5.19%
-1.54%
-0.90%
-0.40%
-0.17%
2.99%
6.95%
13.12%
-4.65%
1.09%
-0.58%
7.66%
1.50%
-0.87%
-1.29%
1.3130
0.9263
1.0890
0.9175
1.6577
0.9607
0.8298
82.91
1.2635
0.8697
1.0479
0.8908
1.6191
0.9120
0.7713
86.05
1.3161
0.9338
1.0909
0.9218
1.6629
0.9613
0.8324
86.34
1.2578
0.8636
1.0426
0.8897
1.6039
0.9107
0.7713
82.90
-3.77%
-6.11%
-3.77%
-2.91%
-2.33%
-5.07%
-7.05%
3.79%
-7.95%
-1.47%
-6.06%
-5.08%
-2.17%
-3.86%
-5.09%
6.99%
3.6325
10.2075
32.11
349
5.6275
6.4175
3.43
1267
3.2075
9.1325
32.37
298.9
4.7775
5.58
3.355
1275
3.675
10.38
33.83
362
5.66
6.4275
3.5775
1291
3.195
9.055
31.52
297.6
4.6625
5.535
3.26
1220
-11.70%
-10.53%
0.81%
-14.36%
-15.10%
-13.05%
-2.19%
0.59%
-23.99%
-29.32%
-17.38%
-28.20%
-21.03%
-12.61%
-6.02%
-16.56%
3215
17.52
66.26
202.10
149.50
345.30
3300
16.45
61.37
193.35
144.75
332.90
3399
17.76
68.48
176.40
150.60
348.40
3019
15.51
60.83
209.95
139.40
325.30
2.64%
-6.11%
-7.38%
-4.33%
-3.18%
-3.59%
22.13%
0.43%
-27.46%
74.11%
4.21%
-10.03%
1288.50
19.50
3.1600
909.55
1424.70
1211.60
17.06
3.01
775.15
1300.50
1290.90
19.57
3.21
913.00
1430.40
1204.30
16.85
3.01
767.35
1296.50
-5.97%
-12.51%
-4.75%
-14.78%
-8.72%
0.63%
-12.24%
-11.43%
8.04%
-5.11%
** Calculating ytd I use the front month continuation chart so it may be a small % off depending on contract month tracking.
RCM Alternatives - Monthly Research
October 2014
Cover Story
More Expensive Cup of Coffee?
Beans Soar to 2 1/2 Year High
By Alexandra Wexler, wsj.com
The sharply rising price for coffee beans means that
morning cup of joe could soon get more expensive—again.
Arabica-coffee prices surged to the highest level in 2½ years
Monday as dry weather in Brazil raised concerns about next
year’s crop.
Coffee prices have nearly doubled this year, with thin
rainfall clipping output from the world’s biggest coffee
grower and fueling worries about how already-weakened
trees will fare next season. Brazil is the source of one-third
of the world’s coffee and about half of the world’s arabica
beans, which are prized for their mild flavor and used in
gourmet blends.
Consumers were already hit with a wave of price increases
this summer by big roasters such as Starbucks Corp. SBUX
-0.88% and Folgers maker J.M. Smucker Co. SJM -0.27%
Now, traders and investors say the return of dry weather in
Brazil could keep prices high for years to come, particularly
if the perennial trees are damaged.
“Brazil is to the coffee market what Saudi Arabia is to the
oil market,” said Harish Sundaresh, commodities strategist
at Loomis, Sayles & Co., a Boston investment adviser that
manages about $220 billion. “If Brazil falls off a cliff, it would
definitely get the market
worried.”
exchange. The contract rallied as much as 9.2% during the day.
In June, J.M. Smucker became the first major U.S. roaster in
nearly three years to lift coffee prices, announcing an average
9% increase in the cost of popular supermarket brands such as
Folgers and Dunkin’ Donuts. Kraft Foods Group Inc. KRFT
-0.26% and Starbucks followed suit with their own price
increases.
“If there isn’t any rain, then certainly Starbucks and those guys
will be feeling some pain,” said Jonathan Camarda, executive
wealth manager at Camarda Wealth Advisory Group. Mr.
Camarda, who manages about $210 million, is considering
adding to shares he first bought in August in the iPath Pure
Beta Coffee exchange-traded note. “You’re looking at definite
further upside” for prices, he said.
Smucker and Kraft couldn’t be immediately reached for
comment. Starbucks declined to discuss pricing plans or
strategy for this article, citing competitive reasons.
However, some traders say thin demand from roasters for the
beans at current prices could quell the rally. Many roasters put
off increasing their prices by running through stockpiles of
less-expensive beans.
Mr. Sundaresh has placed
bets in the futures market
that benefit from rising coffee
prices and expects arabica
prices to trade between $2
and $3 a pound next year.
Arabica coffee for delivery in
December ended Monday up
6.9% at $2.2080 a pound, the
highest level since February
2012 on the ICE Futures U.S.
RCM Alternatives - Monthly Research
22
Cover Story
“Giving up their cup of coffee is
going to be pretty tough to do.”
The recently ended coffee harvest
was Brazil’s smallest in three years,
after the main growing region
experienced its worst drought
in decades in the spring. In July,
unseasonable rains caused some
trees to flower early for the next
year’s crop. But dry weather
followed, causing some of those
trees to drop their flowers, and
others to not flower at all. That
will prevent development of the
coffee cherries that contain the
seeds that are roasted to make
beans.
“You still don’t have significant demand out there,” said
Rodrigo Costa, head of the coffee desk at brokerage
Newedge in New York. “It’s too soon to really have an idea of
the damage.”
A coffee exporter examines the damage to Brazilian fields in
September after drought laid crops low. Anadolu Agency/
Getty Images
Starbucks said in a July earnings call that it had already fixed
prices for 60% of its coffee needs in 2015.
Will Slabaugh, a vice president at Stephens Inc. who covers
Starbucks, said at this point the company has locked in
prices for 2015 and is beginning to do so for the following
year as well. Mr. Slabaugh said that “2016 is looking to
present more and more of a headwind.”
Price increases may not quickly reduce demand, however.
American consumers are unlikely to cut back on coffee
consumption until prices rise by at least 30%, said Thom
Blischok, chief retail strategist at Strategy&, a consulting
firm formerly known as Booz & Co. He said manufacturers
and retailers are likely to change the size of coffee packaging
to stave off further price increases.
“With no significant rainfall in
September, an alarming situation
with substantial losses for 2015
is projected,” Brazil’s National Coffee Council, a growers’
group, said last week.
Next year is an off-year in Brazil’s two-year coffee cycle,
meaning production would already have been lower
without the unusual weather. Global coffee production
could fall short of demand in the season that began Oct. 1
by the largest amount since the crop year ended in 2006, the
International Coffee Organization said in July.
“Brazil is on target to potentially have two deficit years,”
said Brian Kurtzer, senior portfolio manager at Durham,
N.C.-based Verity Asset Management, which manages
about $410 million. “The path of least resistance is still on
the upside.”
Arabica coffee is the only commodity that Mr. Kurtzer is
betting on to increase in price, he said. He bought shares
in the iPath Dow Jones-UBS Coffee Subindex Total Return
exchange-traded note, an investment product that tracks
coffee prices, in August and added to the position last
month.
“Coffee is one of these American staples,” Mr. Blischok said.
RCM Alternatives - Monthly Research
October 2014
This electronic communication and its contents are intended for the recipient only and may contain confidential, nonpublic and/ or privileged information. If you have received this electronic communication in error, please advise the sender
immediately, and delete it from your system (if permitted by law).
This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or
financial products herein named. The factual information of this report has been obtained from sources believed to be
reliable, but is not necessarily exhaustive and is not guaranteed to be accurate. Any market or other opinions expressed
herein are those of the author only as of the date indicated and not necessarily those of RCM Alternatives. “RCM Asset
Management” is a d/b/a of Reliance Capital Markets II, LLC, its affiliates and subsidiaries. Supporting documentation will
be furnished upon request for all claims, comparisons, recommendations, statistics and other technical data used in this
report.
For customers trading options, the charts included in this report are presented for informational purposes only. They are
intended to show how investing in options can depend on the underlying cash and/ or futures prices; specifically whether
or not an option purchaser is buying an in-the-money, at-the-money, or out-of-the-money option. Furthermore, the
purchaser will be able to determine whether or not to exercise his right on an option depending on how the options strike
price compares to the underlying cash and futures price. The charts are not intended to imply that option prices move in
tandem with cash and futures prices. In fact, option prices may only move a fraction of the price move in the underlying
assets and/ or futures. In some cases, the option may not move at all or even move in the opposite direction of the
underlying asset and/ or futures contract.
You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency
transactions (“Forex”) before making any trades. Trading futures, options and Forex involves substantial risk of loss
and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your
circumstances, knowledge and financial resources. You may lose all or more than your initial investment. Opinions, market
data and recommendations are subject to change without notice. Past performance is not necessarily indicative of future
results.
This report contains research as defined in applicable CFTC regulations. Both RCM Alternatives and the research
analysts may have positions in the financial products discussed.
RCM Alternatives
621 S. Plymouth Court
Floor 1
Chicago, IL 60605
Phone: 312-870-1500
Fax:312-275-8123
Email: info@rcmalternatives.com
rcmalternatives.com
© 2012 Reliance Capital Markets II, LLC, DBA RCM Asset Management