As I left the office Friday Sep 13th, I spoke with my Auspice co-founder about something I read describing good trading as "episodic, not continuous". It was a brief conversation as we both agreed that this is indeed the case. Ironically, this occurred hours before Saudi Arabia was hit by drones and cruise missiles, disabling over half of its oil production and sending oil soaring in its biggest one day move ever. It reminded me of an adage in energy trading: never go home short before the weekend.
While it is human nature to want constant gratification, it is a dangerous way to trade or invest. Opportunities in investing are not constant or consistent. The challenge is that good opportunities are often few and far between. They require patience and discipline in order to be prepared and engaged enough to recognize the opportunity when it appears. Moreover, you need to have the capital and structure to invest in place as these are often fleeting opportunities.
To deal with many aspects of episodic living, managing the bankroll is critical. This is the reason good poker players often fold, knowing the odds are not in their favor. Given one of the most critical aspects of the game is to manage the capital pool, betting when there are good odds on a rare hand is critical. Good players do not bet without these odds and they are not betting all the time. Moreover, you can't bet if you have no chips left or make a decent size bet when odds are in your favor.
Did we make a bunch of money post Saudi attacks on September 16th? No (although the CCX ETF rose 18%). Did we lose money? No. Job #1 is to manage the capital pool. Job #2 is to wait patiently for opportunity. Opportunities like we experienced in August are rare. Without taking any atypical risk it was one of our biggest months in history, providing offsetting returns as stocks, commodities, currencies and rates all moved sharply.
At Auspice we remind investors: we don't make money every day, month, quarter or even every year. We aim to make money when it counts and when our strategy has an edge. This is often when investor's portfolio's need it the most as the traditional markets are falling or at very least experiencing volatility which is always unnerving. Returns are not continuous as opportunity is not continuous. Opportunity is episodic - and that requires patience and discipline.
For more about the innovative Auspice quantitative CTA and commodity strategies and the potential portfolio benefits, please give us a call.
IMPORTANT DISCLAIMERS AND NOTES
Futures trading is speculative and is not suitable for all customers. Past results are not necessarily indicative of future results. This document is for information purposes only and should not be construed as an offer, recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. Auspice Capital Advisors Ltd. makes no representation or warranty relating to any information herein, which is derived from independent sources. No securities regulatory authority has expressed an opinion about the securities offered herein and it is an offence to claim otherwise.
For U.S. investors, any reference to the Auspice Diversified Strategy or Program, “ADP”, is only available to Qualified Eligible Persons “QEP’s” as defined by CFTC Regulation 4.7.
For Canadian investors, any reference to the Auspice Diversified Strategy or Program, “ADP”, is only available to “Accredited Investors” as defined by CSA NI 45-106.