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Benedicte Gravrand, Opalesque Geneva: Global Sigma's volatility arbitrage strategy (GS/ Vol) went live in May, after returning a hypothetical back-tested 19% annually on average from January 2007 to May 2017, with a Sharpe Ratio of 2.1. The fund is due to launch this month.
The Boca Raton, Florida-based firm, which manages $230m in AuM, has been trading S&P500 options and analyzing volatility for nearly eight years.
The strategy, which the firm claims is a natural extension of its activities, is a relative value and directional trading approach applied to the VIX futures market.
"The VIX distribution prediction models are informed by Global Sigma's history as one of the earliest and most active managers of the weekly options on the S&P500," the firm says.
The systematic approach is primarily expressed in three ways using VIX and S&P500 futures:
1. Long vs short VIX, term structure spread, relative value,
2. Long or short VIX, directional, beta-hedged with long or short S&P500, mispriced VIX,
3. Long VIX, directional, beta-hedged with long S&P500, tail risk hedge.
The program is managed by CIO Hanming Rao, former quantitative model developer at Millennium Partners and trader at SAC Capital, and research strategist Henry Pang, former vol arb model developer at Saiers Capital and risk management analyst at JP Morgan.
GS/ Vol returned 1.8% in June and 0.4% in Ju...................... To view our full article Click here
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