Chicago Capital Management chicagocapital.altavra.com

Chicago Capital Management's option writing strategy attempts to protect a short-term trading range for the indices that it tracks, sell put and call options on the outer limits of that range, collect the premiums paid up front, and manage the risk of having sold those options.  If, at option expiration, the stock index has not strayed from the projected range, the premiums collected are profit (minus commissions).  If the stock index threatens to breach the range, the advisor must manage this risk by, for example, buying back the contracts or rolling them over.

Effective risk management is a crucial aspect of the trading system.  Account size, reward-to-risk expectation, volatility of market traded, and the nature of other positions taken are all factors in deciding whether to take a position and in determining the amount of equity committed to that position.

Chicago Capital Management's program is not intended as a replacement for investing in traditional asset classes (such as stocks and bonds), but rather as a possible enhancement to a traditional portfolio.  There has historically been a degree of non-correlation between the returns realized on certain commodity interest trading and those on stocks and bonds.  This non-correlation suggests that commodity trading can, in certain circumstances, be a valuable complement to a traditional portfolio.

The objective of the Chicago Capital Management's Spread Arbitrage Program is to achieve appreciation of your assets through the speculative trading in commodity interests, which may include, without limiting the fore going, futures contracts, physical commodities, forward contracts and options on commodity interests.  The Advisor's ability to make a profit will depend largely on the success of the Advisor in anticipating or participating in market trends and price movements and buying or selling accordingly.  No assurance can be made that such objective will be met.

The Spread Arbitrage Program is a discretionary spread trading program that trades in several markets, including meats, agricultural and energies.  The program searches for spreads that deviate from their “normal” range.  If, in the Advisor’s opinion, there is no economic justification for the spread to deviate from its normal pattern, then the Advisor will place trades that will be profitable if the spread moves back to its “normal” range.

Andrei Kirsanov is the trading principal for the Spread Arbitrage Program.  See “The Advisor--Management of the Advisor” in the disclosure document for information regarding Mr. Kirsanov.

Effective risk management is a crucial aspect of the Spread Arbitrage Program.  With the goal of limiting potential loss, Chicago Capital Management uses calculated risk assessment techniques.  Account size, expectation, volatility of market traded and the nature of other positions taken are all factors in deciding whether to take a position and determining the amount of equity committed to that position.  Protective stops may, on occasion, be used to control risks.

Trading decisions may require the exercise of judgment by Chicago Capital Management.  Therefore, the success of trading may depend largely on the trading ability, knowledge and judgment of the Advisor.  Chicago Capital Management will make all decisions regarding the trading of commodity interests, including selecting the markets which will be allowed and the commodities and markets which will be actively traded.  In addition, the Advisor will determine the time at which orders are to be placed with and executed by a broker, the method by which orders are to be placed, the types of orders that are to be placed and the overall leverage for the portfolio.

Chicago Capital Management may employ various strategies for phasing an account in and out of the markets.  Occasionally, when the markets traded are unstable the Advisor may order a temporary reduction of positions and may exit the markets entirely and therefore hold no open positions.

The decision by Chicago Capital Management not to trade certain commodities or not to make certain trades may result at times in missing price moves and hence profits of great magnitude, which other trading managers who are willing to trade these commodities may be able to capture.  The Spread Arbitrage Program is dependent in part on the existence of certain indicators.  There have been periods in the past without such indicators, and those periods may recur.

The trading program to be followed by Chicago Capital Management does not assure successful trading.  Investment decisions made in accordance with this strategy will be based on an assessment of available facts.  However, because of the large quantity off acts at hand, the number of available facts that may be overlooked and the variables that may shift, any investment decision must, in the final analysis, be based on the judgment of the Advisor.

Please note that the details of the Spread Arbitrage Program are proprietary and confidential and are not generally known to its clients.  Accordingly, the description above is of necessity general and not intended to be exhaustive.  Consequently, you will not be able to determine the full details of the program, or whether the program is being followed.  There can be no assurance that the Spread Arbitrage Program will produce profitable results or will not result in losses.

Michael Conner has been involved as a trader in the futures markets since 1974. From 1979 through 1989, he was a registered floor broker and member of the Chicago Mercantile Exchange during which time he handled trading for both his own account, customer accounts and proprietary accounts of several clearing firms. From March 1984 through February 1986, he was also a registered associated person of Glasgow & Gorman Futures Corporation, an introducing broker.

Connor became registered as a sole proprietor commodity trading advisor in March 1988, and incorporated the business as Market Watch, Inc. in September 1989. In September 1990, the firm was registered additionally as a commodity pool operator. Initially, Market Watch produced market letters and market price information primarily oriented towards professional traders. In addition to editing and producing Market Watch, Inc. publications, Connor also managed trading in proprietary accounts for clearing firms on the floor of the Chicago Mercantile Exchange until shortly before June 1989, when he sold his CME membership to devote himself exclusively to customer advisory activities through Market Watch, Inc.  Connor has also been a registered securities representative with Winthrop Securities Inc. from November 1984 through December and from January 1986 through August 1986 with Rodman & Renshaw, Inc. subsequent to that he has been an inactive registered representative with Republic Securities, Inc.

In February 1996, Connor closed and Market Watch, Inc. and Dupage Trader, a small introducing broker he owned, to join LFG as an associated person. In addition to being an associated person with LFG, Connor not only continued to produce overnight reports but also offered his clients the expanded execution and research capabilities of LFG. In January of this year, after LFG merged with Refco, Inc., Connor along with several other LFG associated persons joined Fox, Inc., a non-clearing FCM that has its principal clearing arrangements with Man Financial, Inc. In addition, Connor is also associated with Chicago Captial Management, a member of the National Futures Association, as a Commodity Trading Advisor.

A 1971 graduate of Indiana State University, Connor has made frequent guest appearances on several television and radio financial talk shows. In addition to publishing, Connor also has conducted several futures and options trading seminars and workshops. Before he entered the brokerage industry, Connor had a career as a journalist, working on a financial desk and as a general assignment reporter for major metropolitan newspapers.

The descriptions above are primarily 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.