Balanced Volatility Program
Manager: David Bedford
Address: 1201 Puerta Del Sol, Ste. 227, San Clemente, CA, 92673, U.S.A.
PAST PERMORMANCE IS NOT INDICATIVE OF FUTURE RETURNS.
|Inception Date:||Aug 8, 2007|
|Annual Mgt Fee:||2%|
|Average Monthly Gain:||3.15%||3.25%|
|Average Monthly Loss:||-3.83%||-3.63%|
|Sharpe Ratio (RF 1%):||0.20|
|Annualized Std Dev:||17.94|
|Directional||Long / Short|
|Holding Period||Short Term|
Monthly Returns as Percentage by Year
PAST PERMORMANCE IS NOT INDICATIVE OF FUTURE RETURNS.
DESCRIPTION OF TRADING METHOD AND STRATEGY:
The trading method and strategy applied by CBCM is both proprietary and confidential. As a result, the following discussion is of necessity general in nature, and not intended to by exhaustive. The Advisor relies on proprietary systematic trading models that its Principal has developed and traded in-house. These models operate systematically. The trading strategy is non-directional.
The BVP trading strategy blends various short and long Put options to create an overall position that is buffered from increases in volatility. Furthermore, positions are strategically placed across different calendar months using a "diagonal spread method" providing an overall net long volatility position. Each new position is "delta neutral" which provides additional insulation from market volatility. These core elements result in a balanced strategy.
In May 2010, CBCM developed a proprietary option pricing model. The Advisor believes this "Straight Line Time" option pricing model to be more useful than Black-Scholes in determining the true time decay value of options. It is the opinion of CBCM that the Straight Line Time ("SLT") model identifies the optimal exit points at which open trade positions should be closed.
In December 2011, CBCM put in place a trailing profit stop policy. This enhanced risk parameter has increased the frequency with which the BVP program trades. CBCM believes this adjustment has led to smaller drawdowns and increased per trade profitability, in a market environment that would typically be a challenge for the profit (steadily up-trending without pullbacks).
Trade positions are placed (using proprietary strike level and ratio algorithms) to achieve a strategy that can be profitable in flat or volatile market conditions. Profit is made through the expansion of the spread's "Theta Differential." This creates a position that can make profit from time decay and underlying market moves. The primary risk controls for the BVP are stop limits (which are derived as a function of account value) and real-time monitoring of positions. Furthermore, the BVP only participates in high liquidity markets (currently the S&P 500 futures Put option contracts).
CBCM regularly evaluates its trading methodology and retains the discretion to revise any method or strategy, including the technical trading factors used, the commodity interests traded, and/or the money management principles applied. Such revisions, unless deemed material, will not be made known to clients.
It is the opinion of CBCM that returns alone should never be used to evaluate the merits of an investment. This is particularly true when considering a managed futures program because of the high degree of leverage that is possible with futures. In fact, returns alone reveal nothing about the risks to which an account may have been exposed in pursuit of those returns. By their nature, futures are risky instruments. With respect to trading options on futures contracts, CBCM has imposed certain restrictions and procedures upon the Program, in light of their inherent risk.
Crescent Bay Capital Management, Inc., a California corporation, became registered with the Commodity Futures Trading Commission as a Commodity Trading Advisor ("CTA") on August 23rd, 2004. CBCM was previously registered as a Commodity Pool Operator ("CPO") from November 14th, 2006 to October 18th, 2009. CBCM has been a member of the National Futures Association since August 23rd, 2004. David Bedford (the "Principal") is the sole shareholder of CBCM. He was registered as an Associated Person and listed as a Principal of the firm on August 23rd, 2004. The business office of CBCM is located at: 1201 Puerta Del Sol, Ste. 227; San Clemente, CA 92673; telephone: (949) 276-8718; facsimile: (949) 276-8448.
David Bedford - President/Principal Mr. Bedford graduated in April 1990 from Pepperdine University in Malibu, California with a Bachelor of Science degree in Sports Medicine. In May 1990, he became a Partner of Bedford Hardwood (a wood flooring sales and contracting company). In June 1991, he co-founded Sand Vac Systems (a manufacturer of dust retrieval systems for the construction industry). Mr. Bedford served as Manager of Business Operations for both Bedford Hardwood and Sand Vac Systems through April 1996.
From May 1996 to December 1997, as a Biomaterials Research Associate at University of California at San Francisco, Mr. Bedford managed projects using statistical and quantitative testing methods (a prelude to his future career in trading systems research). From January 1998 to February 2007 he was employed as a District Sales Manager by GC America, an International dental products manufacturer.
While remaining gainfully employed with GC America, Mr. Bedford began graduate coursework in quantitative analysis, statistics, and information technology at Golden Gate University in August 1998. These studies, combined with his interest in the markets, launched the pursuit of profitable trading methods and research. Mr. Bedford has been an active trader since August 1999, testing his methods and skills in the stock, futures, and options markets.
Mr. Bedford serves as President of Crescent Bay Capital Management, Inc. (CBCM) which was formed January 20th, 2003 for the purpose of trading and market research. CBCM was engaged in the research and development of futures trading strategies from January 2003 to August 2004. CBCM has been registered with the National Futures Association (NFA) and the Commodity Futures Trading Commission ("CFTC") as a Commodity Trading Advisor ("CTA") since August 23rd, 2004. CBCM was previously registered as a Commodity Pool Operator ("CPO") from November 14th, 2006 to October 18th, 2009. Mr. Bedford was also listed as a Principal of Light Tower Investments, Inc. (LTI) from October 28th, 2010 to December 17th, 2010. LTI was a pending IB, but never a registered IB, and no business was conducted through this entity while Mr. Bedford was a Principal. He sold his equity share in LTI on January 17th, 2011 and has not had any affiliation with LTI since.
Mr. Bedford continues to research multiple trading strategies and alternative markets in addition to constant management and refinement of CBCM's currently offered managed account programs. The managed futures programs currently open and offered by CBCM are the Premium Stock Index Program ("PSIP") and the Balanced Volatility Program ("BVP").