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Bluenose Capital Management, LLC is a trading advisor that studies financial markets with the goal of developing and implementing strategies to generate better than average growth to investment portfolios. Bluenose Capital Management, LLC’s trading strategies seek to be flexible enough to profit in rising markets as well as declining markets. (The potential for loss is, of course, also equal.) Additionally, Bluenose Capital Management, LLC trading strategy has the potential to perform well in both inflationary and deflationary periods (unlike stocks).  Past results are not necessarily indicative of future results.  The risk of loss in trading futures, options and off-exchange forex can be substantial.

The Bluenose Capital Management, LLC strategy is based on the belief that investments in stock indexes and commodities, not individual stocks or sectors, hold more possibilities for growth than day trading, swing trading, trend following or “buy and hold” strategies. Bluenose Capital Management, LLC believes that their approach to investing will continue to be more effective in repairing the damage that was caused to portfolios by the bear market beginning in 2007 and in generating growth to new portfolios. The markets do not operate in a static environment. They are constantly changing. In order for Bluenose Capital Management, LLC strategies to continue to work it is necessary to continually evaluate where we have been and where we are going and adjust accordingly.

Bluenose Capital Management, LLC trading strategy incorporates five vital elements; fundamental analysis, technical analysis, strategy, money-management and risk assessment. Fundamental analysis is the study of the economic environment, both macro and micro. It is the study of supply and demand, interest rate policy, labor productivity and monetary policies. Fundamental analysis also considers the state of our economy as well as the global economic and political situation. The use of fundamentals assists in recognizing potential trading opportunities and aids in determining what the market is thinking and how it might react. Technical analysis is the study of price movement in the context of statistical and probability outcomes. It is the study of price pattern histories in order to predict how prices might react in the future. The use of technical analysis assists in determining a more favorable entry or exit of Bluenose Capital Management, LLC positions.

After assessing both fundamental and technical conditions of the market Bluenose Capital Management, LLC then ascertains the best strategy. At the present time, Bluenose Capital Management, LLC believes that the selling of premium (writing options) on futures indexes is the best strategy. Proper money management is imperative to the long term success of any portfolio. Bluenose Capital Management understands the importance of this issue and is constantly implementing proper money management techniques. The final element to the plan is risk assessment. Bluenose Capital Management is continually analyzing the markets to ascertain the risks. Risk assessment and money management work together. There are times when they are fully positioned in the markets and times when they are not depending on their opinions of the risk assessment. Although risks cannot be eliminated and profits cannot be guaranteed through money management and risk control, these two steps are vital for the long-term growth we wish Bluenose Capital Management, LLC and its clients to attain. Past results are not necessarily indicative of future results.  The risk of loss in trading futures, options and off-exchange forex can be substantial.

Bluenose Capital Management, LLC will take advantage of the financial markets using diversified strategies. Some of these strategies involve the selling of time (calls and puts) on stock indices or other suitable commodities. At times Bluenose Capital Management may purchase calls and puts to reduce margin or to take advantage of what they believe will be a profitable trade based on market conditions. Bluenose Capital Management looks for investment opportunities trying to capitalize on the fear and greed of the average investor.  Bluenose Capital Management, LLC will follow a long-term plan for portfolio growth and protection. There are times when Bluenose Capital Management, LLC is not in the markets at all and others when they are fully invested.

At present, the main strategy that best meets Bluenose Capital Management, LLC criteria for effective growth to risk management is one that focuses on the writing (selling) of options using futures contracts of indices and other commodities. Bluenose Capital Management currently offer two programs, BNC EI and BNC BI.  BNC EI uses mini contracts which can be executed electronically. BNC BI uses full contract markets and requires an initial capital amount of $30,000.

The objective of the strategy is to achieve substantial capital appreciation through the speculative trading of options on the futures contracts. This entails a comparatively high level of risk. Bluenose Capital Management, LLC currently engages in this strategy of selling or “writing” options (puts and calls) on stock index futures and commodities including, futures and cash markets, agricultural products, metals, currencies, financial instruments, stock and financial economic indices. For the purpose of this program all trading will be completed on exchanges located in the United States.

As stated above, he main strategy of Bluenose Capital Management, LLC is one of selling or “writing” options on stock index futures and other commodities. The seller (writer) of an option risks losing the difference between the premiums received for the option and the price of the underlying futures contract that the writer must purchase upon exercise of the option. This could subject the writer (us) to unlimited risk in the event of an increase in the price of the contract to be purchased or delivered. Bluenose Capital Management, LLC may also, from time to time, purchase options to decrease margins or to be long or short a specific market.

Options consist of two components, intrinsic value and time value. Intrinsic value is the amount the option is in the money and time value is the premium received less intrinsic value. Bluenose Capital Management, LLC mainly uses out of the money options, thus there is no intrinsic value if the option remains out of the money, only time value.

Determining the trading range, the individual strike prices and the quantity of calls and puts is dependent upon the five-part strategy explained above. In analyzing the strike price Bluenose Capital Management takes into consideration prices of the options, where volatility is and how much time remains until expiration. This means the distance from the underlying and our strike price varies and can be an at the money options or be as far away as 10.00% -20.00% away. The percentages constantly change depending on market activity and the particular program you are in. There is no guaranteed safe percentage that can be used.

The first step is analyzing the fundamental environment of the market: Bluenose Capital Management, LLC then determines the current trading range using technical analysis. In essence, trying to determine where the market will not go, as this is often easier then determining where the market will go. Call and put options are sold at different strike prices above and below the predicted trading range. In addition, if Bluenose Capital Management believes that the market has made a strong up move it may only sell calls. If the market has made a strong down move Bluenose Capital Management may only sell puts, if it feels the market is range bound it may initiate a strangle, the simultaneous selling of a call and a put, generally, but not always, within 90 days of expiration. If the market acts as Bluenose Capital Management thinks it will then the options sold will expire worthless. Bluenose Capital Management, LLC is different than the average person who buys options. Bluenose Capital Management believes that most often, options expire at a loss to the buyer and a gain to the seller. The reason for this is simple. In order to make money buying an option you have to be correct on three fronts: timing, direction and volatility. To make money selling options you do not have to be correct on all three variables, most often one is enough. When selling options time is your friend, unlike that of an option buyer, in that each day the option is losing time value or decaying in price.

In the event the market acts contrary to our expectations, it may be necessary to buy back the option before expiration often times at a loss. Several other reasons for covering the position include the protection of profits, to increase the profit potential for the next expiration period, to avoid or minimize a likely loss, or to free up margin to take advantage of a different opportunity. The selling of premium is repeated continuously, market conditions permitting. This strategy helps to maximize a profitable outcome for the client regardless of the direction of the price movement of the underlying index, so long as the index price remains above or below the strike prices of the options sold. This strategy creates a potentially profitable scenario, although not guaranteed, in all types of markets.  Past results are not necessarily indicative of future results.  The risk of loss in trading futures, options and off-exchange forex can be substantial.

The strategy's main benefit is its flexibility. Bluenose Capital Management, LLC is able to adjust for individual’s risk tolerance. This is done by selling calls and puts farther outside the range for a more conservative person and closer to the actual range for a client who wishes to be more aggressive. In addition, there is the ability to adjust the number of options on either the put side or the call side, which allows Bluenose Capital Management to adjust to an index’s price movement in any one direction. There is continuous monitoring of positions in relationship to the price movement of the market, volatility and economic and political developments, both here in the United States and abroad. Flexibility allows Bluenose Capital Management to change our trading whenever it becomes advantageous or necessary.

Rob McLallen, III is Managing Director of Bluenose Capital Management, LLC. Rob McLallen became a Principal of the firm in February 2010. Rob McLallen earned his BBA with a concentration in finance from The College of William and Mary. Rob McLallen is currently a managing member of Castlemaine Partners, LLC, a Virginia Registered Investment Advisor, a position he has held since the founding of the firm in August 2001. As a Managing Member of the firm he is responsible for the management of client funds, marketing and administrative functions of the firm. From August 2001 through December 2009, he served as managing member and principal of Hyperion Capital Management, LLC, the general partner of hedge fund Hyperion Capital Partners, LP. As Managing Member, he was responsible for all the administrative functions of the firm. From March 1999 through August 2001, Rob McLallen was a Financial Advisor with UBS PaineWebber in Vienna, Virginia. While at UBS Paine Webber, Rob McLallen was responsible for assisting clients in planning and investing for significant future events, such as retirement and college education. Rob McLallen was further responsible for building and preserving clients’ wealth through proper asset allocation, investment selection, and planning. From February 1995 through March 1999, he was a Financial Advisor at Merrill Lynch in Vienna, Virginia. At Merrill Lynch, Rob McLallen was responsible for providing to clients consulting on asset allocation, investing and preservation of wealth. UBS PaineWebber and Merrill Lynch are both brokerage firms engaged in the business of investment management. Rob McLallen is Series 63 (Uniform Securities State Law) and Series 65 (Uniform Investment Adviser Law) examination qualified.

Joseph Natoli is Managing Director of Bluenose Capital Management, LLC. Joseph Natoli became a Principal of the firm on April 13, 2010 and an Associated Person on April 27, 2010. Joseph Natoli earned his MBA from George Washington University. Joseph Natoli began working for Chesapeake Investment Services, an Introducing Broker in July of 1998. In November of 2000 he became registered as an Associated Person of Chesapeake Investment and became the Trading Desk Manager. Joseph Natoli was responsible for 20 million dollars in client assets. In his role as Trading Desk Manager he was responsible for advising clients on option strategies, placing discretionary trades and for executing the trading strategies used at Chesapeake Investment Service. These strategies included the selling of options on the S&P 500 Futures contract as well as many other commodities such as crude oil, gold and silver. Joseph Natoli was also responsible for going long or short other commodities such as wheat, soybeans and cotton. Joseph Natoli was constantly evaluating the commodity markets in relationship with the clients existing positions and determining if modifications were required as well as observing over 20 different markets looking for opportunities. This was accomplished through a combination of technical analysis and fundamental analysis. Joseph Natoli left the firm in May of 2003 and was withdrawn as an Associated Person of Chesapeake Investment Services on September 30, 2003. Upon leaving Chesapeake, Joseph Natoli engaged in trading for his personal account until becoming a Principal of Zephyr Asset Management, a Commodity Trading Advisor, on September 15, 2004. On September 17, 2004, Joseph Natoli became an Associated Person with Zepyr Asset Management.  Zephyr Asset Management was closed in October 2007 and Joseph Natoli withdrew on November 22, 2009 as an Associated Person and Principal. From November 2009 until February, 2010, Joseph Natoli was primarily engaged in personal trading and preparing for the launch of Bluenose Capital Management, LLC. In February 2010, Joseph Natoli and Rob McLallen, formed Bluenose Capital Management, LLC. Joseph Natoli became a Principal of Bluenose Capital Management, LLC on April 13, 2010 and an Associated Person on April 27, 2010.

The descriptions above are from the manager’s disclosure document.

THE RISK OF LOSS IN TRADING FUTURES, OPTIONS AND OFF-EXCHANGE FOREX CAN BE SUBSTANTIAL.  PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.  PLEASE READ THE CTA'S RISK DISCLOSURE DOCUMENT CAREFULLY BEFORE INVESTING MONEY.