Strategies

Our approach:

Our experience shows that the competition between the discrete and algorithmic approaches to make a profit from operations in the stock market is not possible. Regardless of how the international financial system will be reformed and what changes will be made in the stock market infrastructure, the human role in trading will be reduced to maintenance of operation of algorithmic systems. In other words human being will create hypotheses, develop the analytical component of trading strategies, build trade infrastructure, but he will no longer be able to play a key role directly in the trading process as already now he is unable to get ahead of the trading robots when making decisions. It is for this reason that the Board of Directors decided that within the Fund will be implemented solely trading strategies based on algorithmic systems.

Our principles:

When choosing strategies, we were guided by the following principles:
Any strategy must be tested in real market conditions, regardless of the results it showed during the pre-testing. Such testing of strategies shall last for several cycles.
The profitability of the strategies shall exceed the rates on bank deposits by several times.
Any strategy must have a capacity of not less than $ 30 million.
Critical risk per strategy must not exceed 50%. At this level of risk we are able to arrest the decline in value of the Fund at 10% by using the techniques and methods of money management.

Types of strategies:

Delta neutral options trading
This Strategy is based on medium-term retention of a complex position, consisting of stock options and the underlying asset. The profit is formed due to a special approach in the valuation of stock options.
The strategy’s cycle takes from 1 to 3 months.
Risks arise from the sudden movements of the underlying asset by more than 25%. The probability of such a movement is relatively small, due to the fact that the underlying assets are the shares of the largest companies, as well as most heavy ETF traded on the stock markets of the U.S.
Traded markets: NYSE, NASDAQ, AMEX, OPRA.
Expected profit: 60+%
The maximum allowable loss: 20%
The strategy is used by trader for 1 year and showed the following dynamics:
Testing on historical data shows a similar trend.

Statistical arbitrage.
The strategy is based on statistically distinguished regularities in the behavior of a group of instruments with similar fundamental indicators. The profit is derived due to extensive statistical research and continuous self-adaptation of the system to the changing technical characteristics of traded instruments.
There is a probability of fixation of unprofitable positions on this strategy during heavy, unpredicted change of technical specifications of traded instruments. However, losses may not be significant, due to the strong diversification.
The strategy’s cycle takes from 1 to 6 months.
Traded markets: MICEX, RTS, NYSE, NASDAQ, AMEX.
Expected profit: 30%
The maximum allowable loss: 10%
The strategy is used by trader for 2 years and showed the following dynamics:
Testing on historical data shows a similar trend.

Trend-term trading.
This medium-term strategy implies holding the positions on the most volatile instruments on stock and futures markets of the U.S.A. and Russia. Distinctive feature of the strategy is the understanding of prerequisites for medium movements, based on intraday fluctuations as well as monitoring of signals to entrance to position on the full range of instruments available on the traded markets.
The strategy’s cycle takes from 2 to 10 days.
Theoretically this strategy may fail in case of emergence of global infrastructure changes of stock markets. When using the strategy the losses are possible but they cannot be explosive in growth because of the strong diversification.
Traded markets: MICEX, RTS, NYSE, NASDAQ, AMEX.
Expected profit: 50+%
The maximum allowable loss: 15%
The strategy is used by trader for 3 years and showed the following dynamics:
Testing on historical data shows a similar trend.

Risks associated with algorithmic trading:

It should be remembered that any algorithm is allowed to use the capital of the Fund only after careful examination and can yield losses only for a very short period of time.
The allowable loss of 10% is possible only if all algorithms are incurring losses simultaneously. None of the strategies may cause more than 3% losses for the Fund.