CME Group and BarclayHedge last week honored the best in the Managed Futures industry at the second annual Managed Futures Pinnacle Awards. Keith Campbell (featured in the video below) took home the Managed Futures Pinnacle Achievement award for his more than 40 years of success in building his firm, Campbell & Company, into a widely respected provider of absolute return investment strategies.

More than 400 people gathered in Chicago to honor winners in 13 other categories at a ceremony hosted by Fox Business Network’s Liz Claman. Each category featured three nominees.

Commodity Trading Advisor (CTA) programs have rebounded this year after declines of 3 percent and 1.7 percent in 2011 and 2012, respectively, according to BarclayHedge. Traditionally, however, CTAs have provided positive returns. Since BarclayHedge launched its CTA Index in 1980, there have been only six years that netted negative returns. Though the month of May saw a 1.3 percent decline, the index has seen a .7 percent return year-to-date.

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By Mark Shore

In today’s market environment, volatility is an increasingly important asset class. The benefits of volatility futures contracts are numerous:

-Volatility futures as a sector or asset class may increase a portfolio’s diversification or hedging opportunities.

-It tends to be negatively correlated to stock indexes.

-With contracts like VSTOXX® Futures, which are EUR-denominated volatility futures, an investor with EUR-denominated equity exposure does not have currency risk and exposure. Further, with increased volatility in the Eurozone, VSTOXX® Futures are a targeted way to gain exposure to Europe.

VSTOXX® Futures are listed at Eurex Exchange and are derived from the underlying EURO STOXX 50® Index Options. The increasing demand by investors to reduce portfolio volatility caused the development of volatility futures. The VSTOXX® Future contract is a 30 day forward on the implied volatility of the EURO STOXX 50® Index.

VSTOXX® Futures feature the same benefits of any exchange traded futures contract: 1) Marked-to-Market transparency. 2) Offering liquidity for hedgers and investors (See table 2). 3) Regulated exchange and market. 4) Central clearing of transactions, reducing counter-party default risk. 5) Price discovery of the market. 6) Standardized trading hours and contract specifications. FVS is the VSTOXX® ticker symbol.

For U.S.-based traders and investors, it makes sense to compare the VSTOXX®  and VIX® Indexes from a historical perspective.

To understand the VSTOXX® Index, let’s first define the EURO STOXX 50® Index. The index represents READ MORE

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Copyright ©2013 Mark Shore. Contact the author for permission for republication at info@shorecapmgmt.com Mark Shore has more than 25 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments and conducts educational workshops. www.shorecapmgmt.com

Mark Shore is also an Adjunct Professor at DePaul University's Kellstadt Graduate School of Business in Chicago where he teaches a managed futures / global macro course and an Adjunct at the New York Institute of Finance. Mark is a contributing writer to Reuters HedgeWorld.

Past performance is not necessarily indicative of future results.  There is risk of loss when investing in futures and options.  Futures and options can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone. The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.

By Mark Shore

Our series of trading strategies for the CBOE Volatility Index® (VIX®) futures contract traded on CBOE Futures Exchange, LLC (CFE®), have discussed various VIX futures trading ideas. This article discusses the Mass Index. As the VIX futures tends to be a range bound product, this strategy may be of special interest to our readers as it seeks market turning points.

First let's examine the recent liquidity of CFE. On June 3, 2013, an increased volume of 59% was reported for May 2013 versus May 2012. The volume was 3,220,913 in May 2013 versus 2,022,253 in May 2012.i Year-to-date volume was 16,534,805 for 2013 versus 7,838,325 for 2012, an increase of 111%.

Specific to VIX futures, May 2013 experienced trading volume of 3,212,399, the third highest month, behind March and April 2013 (3,220,977 and 4,056,760 respectively) and 61% higher than May 2012. The month of May was the fourth consecutive month in the contract's history of trading volume exceeding 3 million contracts. In May 2013 the monthly average daily volume was 146,018 versus 90,908 in May 2012, an increase of 61%.

The Mass Index was developed by Donald Dorsey and was initially discussed in the June 1992 issue of Technical Analysis of Stocks and Commodities magazine. The Mass Index seeks to identify trend reversals for overbought and oversold markets. This is measured by the increasing or decreasing of the market's range between high and low prices. The Mass Index will increase as the range increases and will decrease as the range decreases.

The Mass Index is a 25-period moving sum of the ratio of two moving averages. The first average is a 9-period exponentially moving average of the high and the low differential. The second average is a 9-period exponential moving average of the first average. Increasing the sum widens the gap and the Mass Index moves higher.ii

Dorsey refers to the "reversal bulge" as an important Mass Index pattern for a high probability of the market reversing direction. This tends to occur when the Mass Index exceeds 27 and quickly falls below 26.5. To determine the reversal direction of the move, buy if the 9-period exponential moving average of the market is trending down and sell if the 9-period exponential moving average is trending up.iii However, a reversal bulge may be an infrequent occurrence.

In Chart 1 noted below, the near-term VIX futures contract offers suggests times when the reversal bulge appears. In each case the VIX futures contract was at or near its historical resistance level then began a sell off that lasted several months.

In October 2008 (during the financial crisis) VIX futures reached a high of 69.40 and the Mass Index signaled an overbought market since late September / early October 2008. Between March 23 and March 29, 2009, the reversal bulge appeared as the Mass Index fell below 26.5. The exponential 9-week moving average was higher as the market rallied. This would then be a signal to short VIX futures. This signal lasted into early 2010.

Between July 26, 2010 and Oct 11, 2010, the reversal bulge signal appeared again. The exponential 9-week moving average was signaling a short position. This signal lasted until early or mid 2011.

In the last few months of 2011, the Mass Index indicated an overbought position. During January, the Mass Index signaled a shorting signal for VIX futures. This signal lasted into May or June of 2012. Basis, weekly data and the Mass Index does not offer frequent signals, but they tend to offer signals when the market is overbought and the reversal may last for several months.

Chart 1: VIX Futures Weekly Nearest Futures with a 9 Day Exponential Moving Average and Mass Index, Ending June 18, 2013

Source: www.barchart.com

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i"May 2013 Trading Volume in VIX Futures Post Gains Over a Year Ago" CFE Press Release June 3, 2013
iiwww.barchart.com
iiiAchelis, S. (2001). Technical Analysis from A to Z. New York, McGraw-Hill, 181:183

Copyright ©2013 Mark Shore. Contact the author for permission for republication at info@shorecapmgmt.com Mark Shore has more than 20 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments and conducts educational workshops. www.shorecapmgmt.com

Mark Shore is also an Adjunct Professor at DePaul University's Kellstadt Graduate School of Business in Chicago where he teaches a managed futures / global macro course and an Adjunct at the New York Institute of Finance. Mark is a contributing writer to Reuters HedgeWorld.

Past performance is not necessarily indicative of future results.  There is risk of loss when investing in futures and options.  Always review a complete CTA disclosure document before investing in any Managed Futures program.  Managed futures can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone.  The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.

CTAExpo LLC Presents:
Emerging Manager Forum London 2013

EMF is a one day conference consisting of speakers and panels combined with a concurrent schedule of thirty minute presentations by individual traders. The first Emerging Manager Forum, London, in 2011 sold out and had over 250 attendees.

The Emerging Manager Forum in London provides emerging hedge funds and CTAs the opportunity to network with European family offices, capital raisers and allocators looking to identify trading talent as a source of alpha. EMF also offers sessions on how managers can grow their business, gain access to U.S. capital sources and how allocators can more effectively manage their portfolios.

Speakers:
Frank Pusateri
Bucky Isaacson
Robert J. O’Brien Jr (County Cork)
Jean-Francois Crousillat (Hedge-Mark Advisors)
Greg Taylor (ARM Capital)
James Skeggs (Newedge)
Dermot Butler (Custom House)
Jerome De Lavenere Lusan (Laven Partners)
Nikhil Mehta (Gray’s Inn Tax Chambers)
Ita McArdle (Isle of Man)
Bob Swarup (Cambor Global)
Richard Morris (Profundcom)
Bryan Johnson (Johnson & Co.)
Gina McFadden (President, The Options Investment Council)
Ravi Anand (Dexion Capital)
Jonathan Jachym (Europe, Middle East & Africa, Head of Compliance, CME Group)
Jonathan Thursby (COO Repository Services, CME Group)

Topics:
The Future of Hedge Funds and Managed Account Structures: The Institutional Perspective

Building the Foundation for Effective Capital Raising

A Framework for Considering Managed Futures Capacity When Evaluating CTAs

Choosing the Proper Fund Domicile

Keynote Speaker: A Mistaken Correlation to Economic Growth and Investment Returns

Effective Marketing Strategies for the Emerging Manager

Trends, Regulations, and Opportunities in the World’s Largest Options Market

Trends and Issues in the Hedge Fund Manager Merger and Acquisition

EMEA… Responsibilities and Pitfalls for Alternative Managers

Date: Thursday June 27, 2013
Venue: The Mayfair Hotel Stratton Street, London, W1J 8LT, United Kingdom
Time: 8am to 4:30pm Cocktail reception following the event

For information and registration click here

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