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Diamond Capital Management

diamond.altavra.com

Open A Futures and/or Forex Trading Account.

Manager Name: Diamond Capital Management
Program Name: Enhanced S&P, Stock Index Options
Minimum Investment: 100,000 USD
Strategy: Systematic, Trend, Option-Trading
Markets: S&P 500 Index
Restrictions: None
Disclosure Document: Disclosure Document: Diamond Capital Management
Management Agreement: Management Agreement: Diamond Capital Management
Download Page: Download & Save: Diamond Capital Management
Print Page: Printable Version: Diamond Capital Management
Disclosure Statement: Open

View The Performance Report for

Diamond Capital Management

includes free access to the managed futures database

Managed Futures CTA Report: Diamond Capital Management

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Online Account Application: open.altavra.com / Account Forms: forms.altavra.com / Manager Shortcut: diamond.altavra.com

Program Description: Trading Methodology & Risk Management

 

Diamond Capital Management currently offers two trading programs, the Enhanced S&P Program (ESP) and the Stock Index Options Program. The trading strategies utilized by Diamond Capital Management are proprietary and confidential. The following descriptions are of general necessity and are not intended to be all-inclusive.

 

Recommended Commitment

Diamond Capital Management recommends that Clients open accounts with a minimum of $100,000 for either the Enhanced S&P Program (ESP) or Stock Index Option Trading Program in order to ensure that Clients will have sufficient equity in their accounts to fully participate in the Program. However, Diamond Capital Management reserves the right to waive this minimum funding requirement.

 

Diamond Capital Management believes that a long-term commitment to its Program provides the best opportunity to experience profitable trading. A client should be willing to commit capital to the Program for at least one year for a reasonable chance to ascertain the level of return targeted by the Program.

 

Enhanced S&P Program (ESP)

Trading Methodology

The Enhanced S&P Program (ESP) consists of primarily two basic trading components. These include a trend-following system enhanced with a premium capture system.


Trend-Following System

This system utilizes a computerized technical trend-following strategy with various levels of money management techniques. The principal objective is to profit from sustained futures price trends. Trend following is a method of trading which seeks to establish and maintain market positions based on major price movements.


The system first determines whether the S&P market is in a bull or bear trend, then trades only with the trend until it gets stopped out. A stop would occur when the S&P moves out of the current trend but has not yet entered into the opposite trend. Within the Trend Following System, proprietary short-term counter-trend signals may be used to get out of the current position or even trade against the trend on a short-term basis. A stop-loss does not guarantee an exit at a particular price.

 

Premium Capture System

Within this program, Diamond Capital Management will also write covered and/or uncovered options to capture premiums to increase the potential profits. (Option positions may also increase the risk of market exposure from time to time.) Each month puts and calls will be written – the goal being to capture the premiums either by letting the written options expire or by purchasing them back at lower price.

 

The Volatility Index (also known as the VIX) will be used to determine the number of options to sell and what strike prices to be utilized. Strict risk controls will be in place to limit the downside risks and achieve a desirable risk/reward ratio.


Use of Trend-Following Analysis

The trend following portion of the program may utilize short-term, medium-term or long-term positions. The program may trade both the long and short sides of the market. In its evaluation of the markets, Diamond Capital Management employs a trend-following strategy. One method of successful speculative commodity trading depends upon establishing a position and then maintaining the position while the market moves in a favorable direction. The trader then seeks to exit the particular market and may establish reverse positions when the initial trend either does not materialize or reverses. Trading will not typically be successful if the particular market is moving in an erratic and non-trending manner. Because of the nature of the commodities markets, there will be frequent false-trends. A pure trend-following trading system, method, strategy or model will never direct market entry or exit at the most favorable prices. Rather, this type of trading method seeks to close out losing positions and to hold portions of profitable positions for as long as the trader determines that the particular market trend continues to exist and liquidates when the trend reverses. As a result, the number of losing transactions can be expected to exceed the number of profitable transactions. However, if the approach is successful, these losses should be relatively smaller and should be more than offset by a few larger gains.  Past results are not necessarily indicative of future results. The risk of loss in trading futures, options and off-exchange forex.


Use of Stock Index Options

The option trading for this program is based primarily on writing out-of-the-money call and put options with the expectation that the options will either be bought back at a lower price or expire. In order to efficiently control risk, based on a proprietary risk control system developed by Albert Hu, the trader will roll out of positions either vertically (to a further month) or diagonally (further out-of-the-money), as determined by current market conditions. From time to time, options may also be rolled closer to the underlying futures price if the perceived risk/reward is favorable. Technical analysis, chart reading and pattern recognition are used to determine which options to write for each monthly cycle. Occasionally, options may be purchased to either hedge positions or speculate on substantial movement in the underlying stock index. Indicators for this component of the program are primarily based on those used in the Stock Index Options Program.

 

Stock Index Options Program

Trading Methodology

The Stock Index Options Trading Program will take the place of the previously offered Option Trading Program. While the two programs have many similarities, after much consideration and research it was determined that the Stock Index Options Program offers the best risk/reward potential and is better suited for the current environment. Albert Hu has been actively trading the Stock Index Options Program for proprietary accounts since June 2006. In October 2008, Albert Hu completely overhauled the applied proprietary risk control system.


Diamond Capital Management currently engages in a program of selling or “writing” out-of-the-money options (both puts and calls) on stock index futures. From time to time, stock index futures may be used for hedging or short term trading.


The Stock Index Options Program utilizes a strategy that relies heavily on selling or “writing” options on stock index futures with the expectation that either they will expire without the need to buy them back, or will be bought back at a cheaper price to realize a profit. However, in order to control risk, based on a proprietary risk control system, the advisor will roll out either vertically or diagonally (to a further month and further out-of-the-money options) to buy space or space and time. Diamond Capital Management may also roll the options written closer to the underlying futures price if it perceives the risk/reward is in its favor to do so. Occasionally, Diamond Capital Management may trade stock index futures, or purchase options, either to hedge other positions or speculate on favorable short term substantial movement in the underlying stock index.


The implementation of this trade program depends on statistical analysis, chart reading and pattern recognition to determine which options to write on each monthly cycle. Technical analysis involves the study of charted prices, volumes, momentum, strengths, and moving averages to determine the future course of prices. Technical indicators also include the prices of various options, both in absolute terms in relation to their historic price level, and in relative terms comparing the prices of puts to the prices of similar calls.


It is the intention of Diamond Capital Management to write mainly “out-of-the-money” puts and calls. “Out-of-the-money” puts have strike prices below the current price of the index, and “out-of-the-money” calls have strike prices above the current index price. Thus, if the index remains within the predetermined trading range, based on current volatility, time to expiration, and various other market conditions, and the option remains “out-of-the-money” until expiration, the puts and calls will be profitable.


The trading strategies utilized within this program have pre-defined profit goals and risk exposure. One important factor about the program is that it had a major overhaul as the end of 2008. The changes from the overhaul resulted in a more systematic program with more rigorous risk controls in place. Stop-loss measures are utilized as well as the use of derivative hedging techniques to quantify market exposure. Market conditions are monitored for liquidity, range of movement and implied volatility measured against historical volatility. In doing so, Diamond Capital Management employs money management skills acquired over years of experience. Please note that given the volatile nature of the markets and possible changes in economic or government policies, amongst other factors, that can not be controlled or foreseen by the Advisor, no assurances can be offered that Diamond Capital Management's trading actions and stop loss measures will successfully contain losses and result in profitable trades for a Client, or that a Client will not incur substantial losses.


Diamond Capital Management may refine or change trading methods and strategies (including technical trading factors or analyses) at any time without prior notice to or approval by participating customers. Diamond Capital Management in its sole discretion may elect to not trade at certain times or may elect at times to trade in smaller quantities. The exercise of this discretion by Diamond Capital Management may result in missing significant profit opportunities or avoiding risks that may otherwise be realized.


Form of Margin Deposits

A customer participating in the Managed Account Program must deposit trading funds directly in a commodity trading account with an Futures Commission Merchant. If Treasury bills are purchased for a participating customer’s account, such Treasury bills are utilized as initial margin for commodity interest transactions, although the Futures Commission Merchant generally credits a customer’s margin requirement with only 90% of the face value thereof. All interest income earned on such Treasury bills is credited to the participating customer’s account and Diamond Capital Management will not receive an incentive fee on such interest income.


Diamond Capital Management's Trading Strategies Are Speculative in Nature

“Hedgers” and “Speculators” are the two broad classifications of persons who trade in commodity futures and options. The commodities markets enable the hedger to shift risk of price volatility to the speculator. The usual objective of the hedger is to protect the profit expected from farming, merchandising or processing operations, rather than to profit from futures trading. Unlike the hedger, the speculator generally does not expect to deliver or receive any physical commodity, electing instead to offset a futures or option position and realizing a profit or loss based on the difference between the price at which a position was acquired and that at which it was later offset. The speculator risks capital with the intention of making profits from fluctuations in futures or option prices. Speculators rarely take delivery of physical commodities but rather close out positions by entering into offsetting purchases or sales of futures contracts or options.


Trading Strategies and Systems

The trading strategies and systems utilized by Diamond Capital Management may be revised from time to time as a result of ongoing research and development, which seeks to devise new trading strategies and systems as well as test methods currently employed. The trading strategies and systems used by Diamond Capital Management in the future may differ significantly from those presently used due to the changes which may result from this research. Clients will not be informed of these changes as they may occur.

 

Management Information: M. Kelly Farrell

M. Kelly Farrell has over 24 years of investment experience. In June 1987, she began her career as an assistant to three executive securities brokers at Prudential Bache Securities in Milwaukee, Wisconsin, which provided sales and trading in US and foreign equity securities. In March 1989, Ms. Farrell left Prudential Bache Securities LLC and joined the Institutional Custody Department at Firstar Bank, N.A., as an Institutional Custody Service Representative. M. Kelly Farrell assumed a management position in 1992, supervising Institutional Custody Service Representatives who had the responsibilities of interfacing with over 200 Registered Investment Advisors, providing short term cash investments, portfolio trade settlements and various other related institutional custody services. M. Kelly Farrell became the Trading Desk Manager and General Securities Principal for Firstar Investment Services in May of 1997, where she supervised Registered Representatives on both the fixed income institutional sales and trading desk, as well as the retail brokerage-trading desk. M. Kelly Farrell assumed the lead trading position as the Fixed Income Product Manager for Firstar Bank’s Fixed Income Department in February of 1998. M. Kelly Farrell moved directly into institutional sales for Firstar Bank’s Fixed Income Department in January of 1999 until January 2001, working with correspondent banks, trust accounts, money managers, mutual funds and high net worth individuals, increasing sales revenue by 500% in 2000. M. Kelly Farrell also assisted the Fixed Income Product Managers perform various trading functions. During this time, from January of 2000 through December of 2000 M. Kelly Farrell also acted as a General Securities Principal for Quasar Distributors LLC (division of Firstar), a mutual funds distributor, in a consultative capacity, and to provide managerial and principal back up. In connection with her registration as a Registered Representative and General Securities Principal, M. Kelly Farrell passed the Series 7, Series 24 and Series 63 licensing examinations. M. Kelly Farrell left Firstar in January of 2001 to form Lochlan Capital Management. After January 2001, she worked on developing an option trading program and offered that program to clients of Diamond Capital Management in November 2002. In July 2001 M. Kelly Farrell passed the Series 3 and was registered as a NFA Associated Member. M. Kelly Farrell became registered as an Associated Person (“AP”) and became listed as a trading and operational principal of the Lochlan Capital Management LLC, a registered Commodity Trading Advisor (CTA), on August 10, 2001. In addition, M. Kelly Farrell became registered as an AP of R&S Investment Services LLC, a registered Commodity Pool Operator (CPO), and as an Associated Person (AP) and trading principal of Inlet Asset Management Inc, also a registered Commodity Pool Operator, in August of 2001 until February 2002. M. Kelly Farrell remained a NFA Associated Member until February 25, 2002 at which time she withdrew to form Diamond Capital Management. M. Kelly Farrell became registered as an Associated Person on November 12, 2002 and became listed as a principal of Diamond Capital Management on November 11, 2002.

 

Management Information: Albert L. Hu

Albert L. Hu brings to Diamond Capital Management a background including 30 years of financial experience. Albert L. Hu, born in 1947, earned a M. S. degree in Applied Mathematics from the University of Santa Clara in 1973. Albert L. Hu was a computer engineer at Amdahl Corporation, a manufacturer of IBM mainframe-compatible computers, from June 1973 to June 1980. From July 1980 to Dec 1982, he was a stockbroker for Paine Webber & Co. (later acquired by UBS Financial Services Inc. in 2000), which provided sales and trading in US and foreign equity securities. From Jan 1983 to May 1983, he traded on the New York Futures Exchange as a floor trader. From May 1983 to April 1984 Albert L. Hu stayed at home as a professional investor. Albert L. Hu worked for Merrill Lynch Pierce Fenner & Smith from April 1984 until June 1986 and Prudential Equity Group from June 1986 to November 1987, both Futures Commission Merchants providing sales and trading in US and foreign commodity interests, as an account executive. Albert L. Hu became listed as Associated Person of ALH Capital Management, Inc. a registered CTA and CPO from October 1987 until December 1990, and became listed as a trading and operational Principal of ALH Capital Management, Inc. from March 1989 until December 1990. Albert L. Hu became listed as trading and operational principal and Associated Person of ALH Brokerage, Inc., an IB, from October 1987 until February 1989. Albert L. Hu joined Heritage Commodity Consultants, Inc. a registered CPO and CTA, in October 1989 as Vice President and Director of Trading, managing trading and meeting with clients to discuss the trading program. He left Heritage in March 1992. He spent the rest of 1992 developing a computerized system for trading foreign currencies and offered that program to clients in January 1993. Albert L. Hu became listed as Principal of ALH Capital Corp., a registered CTA, in April 1992 and became an Associated Person of ALH Capital Corp. in March 1994. During this time, ALH Capital Corp. became registered as a CPO in March 1994 until April 1997. ALH Capital Corp. was dissolved in 2006 and Albert L. Hu withdrew his registration from CFTC and NFA in May 2006. At that same time in May 2006, Albert L. Hu became registered as CPO and was the pool operator and general partner of Platinum, LP, a limited partnership which invests in both equities and futures interests. Since the partnership is only for Albert L. Hu, his family members and a friend, he filed for exemption, under CFTC rule 4.13(a)(2), for the Limited Partnership in June 2007 with NFA and withdrew his registration as CPO at the same time. Albert L. Hu has since continued to trade and manage investments for Platinum LP, under exempt status as outlined above. In February 2008, Albert L. Hu formed Los Altos Capital Management LLC, a registered CTA for which he became registered as an Associated Person and listed as a trading and operational principal in April 2008. However, due to lack of marketing effort, he withdrew the registrations in November 2008. In August 2009, Albert L. Hu became registered as an Associated Person and became listed as a branch manager and principal of Diamond Capital Management in September 2009. His responsibilities at Diamond Capital Management include risk management, research, trading, and product development.


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. 

 

Disclosure Statement       Disclosure DocumentDisclosure Document: Diamond Capital Management       Management AgreementManagement Agreement: Diamond Capital Management       Download PageDownload & Save: Diamond Capital Management       Print Page Printable Version: Diamond Capital Management

 

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THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS CAN BE SUBSTANTIAL. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF ALTAVRA AND IS, OR IS IN THE NATURE OF A SOLICITATION. THIS MATERIAL IS NOT A RESEARCH REPORT PREPARED BY AN ALTAVRA RESEARCH DEPARTMENT. YOU AGREE THAT YOU ARE AN EXPERIENCED USER OF THE FINANCIAL MARKETS, CAPABLE OF MAKING INDEPENDENT TRADING DECISIONS, AND AGREE THAT YOU ARE NOT, AND WILL NOT RELY SOLELY ON THIS DOCUMENT IN MAKING TRADING DECISIONS. (ALTAVRA.CO/RISK)

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