Hanming Rao: High Alpha, high Sharpe using Weekly-Expiry Options

Описание: 00:00 - Intro

00:35 - Hanming rao started to trade when he was studying at Harvard
Before setting up his own firm, Hanming cut his teeth at some of the world’s leading hedge funds: Ellington, SAC and Millenium Partners.

02:17 - High Alpha, high sharpe using weekly options

03:18 - Global Sigma’s diversified investor base
Trading short dated options on the S&P 500 which generally are overpriced
Main risk: Gamma exposure

05:26 - How is Global Sigma different than its competitors?
Uncorrelated with underlying asset classes
Similar strategy traders US Treasury Bond/Note options and futures
Reasons investors should consider options strategies.

06:48 - What are benefits of being in Florida?
Global Sigma Team

Hanming Rao obtained a Bachelor of Engineering at the Tsinghua University in China before moving on to Harvard in 1997 where he obtained a PhD Engineering Sciences and a Masters in Computer Science. As a student at Harvard he opened a trading account and started to trade options.

He began his career in finance in 2005 as a Quantitative Researcher at Ellington Management. From 2006 to 2009, he was a Global Macro trader at SAC Capital where he managed a exposure in global futures and OTC products including short-term OTC options on the S&P500 Index.

In early 2009 Hanming joined Millennium Partners which he left on friendly terms to set up his own firm having obtained seed capital from an X-Harvard Professor. Today, Global Sigma manages approximately $300m in two main strategies involving options and futures on the S&P500 and Treasury Bond/Note contracts.

The original program has a track record of six and a half years. Over this time, the program has generated an average annual return of 14% with a 2.6 Sharpe with 92% profitable months. The correlation to the S&P500 has been -0.04.

Hanming is supported by a team of seven in the areas of trading, operations and marketing.

The Model

Global Sigma began trading managed accounts in late 2009 around the same time the weekly expiry options contract on the S&P500 was launched by the CME. Global Sigma employs a model-driven, high turn-over approach to trading options.

Global Sigma has become one of the most active managers of the weekly expiry S&P500 options contract in the CTA industry and generally seeks to trade inefficiently priced Puts and Calls. The strategy partially hedges the portfolio’s Delta/Gamma exposures in a discretionary manner by taking positions in the S&P500 futures market and by buying under priced Puts and Calls. The average daily Delta exposure of the portfolio since inception has been -0.13, -0.23 since January 2013.

Risk Management

Due to the high weekly turn-over of the portfolio, the primary risk exposure is Gamma. This is in contrast to the typical option portfolio that sells longer dated expiry options and is subject to significant vega risk exposures. Implied Volatility is more of a “fear factor” market perception than a price you can see. This market “perception” is much more difficult to model/forecast compared to forecasting short-term Gamma/S&P500 prices. The Delta/Gamma exposure of the portfolio can be hedged 24 hours a day via the S&P500 futures market.

DISCLOSURE: THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. PER CFTC RULE 4.7, THIS EMAIL IS FOR QEP (QUALIFIED ELIGIBLE PERSONS) ONLY. Please consult your own financial, tax, legal and risk advisors before making an investment in any product. If you are an EU fund investor and did not initiate communication with Emerging Manager Advisors, LLC (and affiliates) - please disregard this email. This is not an offer to invest in any securities or managed account products. EMA may have an introducing Broker relationship with the FCMs that execute and clear trades.