| MI's
trading program seeks to improve risk-adjusted return to obtain a rate of
return that can be maintained in the long run for the overall portfolio.
Our overall strategy is based on the belief that there are two keys to long-term
success in trading: First is utilizing a trading plan which has a realistic
probability of making money in the long run, and second is having the discipline
and wherewithal to follow the plan. MI approaches derivatives trading as
an investment vehicle, not as speculation. Our goal is to offer an alternative
to the typical stock and bond portfolios. We believe that a derivatives
trading account, when properly managed, does indeed offer a viable investment
vehicle that can generate profits which are not dependent upon the overall
trends in the stock and bond markets. Without exception, all researchers found managed futures products to have higher variability (as measured by variance or standard deviation) than stocks, bonds or Treasury bills. The question then becomes whether returns were high enough to justify this additional risk. Researchers found that returns for CTAs were indeed higher than stocks, bonds and Treasury bills. MI utilizes a systematic trading approach it has developed and refined over a number of years. Of equal importance, MI has the discipline to follow its trading system. MI's trading strategy allows it to participate in a large portion of the major price movements, locks in the majority of any substantial open profit, and reduces its risk exposure in unfavorable market conditions. In selecting futures markets to trade, MI looks for adequate trading volume and contract open interest, and also analyzes a given market's correlation with other markets already in its portfolio. Since MI follows a number of different systems and parameter sets, it selects markets meeting its initial criteria based on how consistently they have performed historically with its systems. MI employs several different trading systems and, based on the historical performance characteristics, it knows which markets perform best using these systems. It may trade two contracts of the same market using two different systems. It may also utilize the same system with different parameter sets for a given market. As a result, with additional money under management, MI may first consider trading additional contracts of one of the markets already being traded using different systems or parameter sets, rather than adding additional markets to its portfolio. Entry and exit signals for all strategies are created to initiate positions at points that have historically indicated the beginning of market moves and mathematically adapt to ever-changing market conditions. MI believes that one of the major strengths of its program is its diversification across strategies and its ability to follow each trading strategy's signals independently. It is important to emphasize that MI's goal is to make money with low risk, not to crunch numbers and generate beautifully non-correlated portfolios as a theoretical exercise. If MI has a choice between trading two markets it highly expects to make money with employing its systems versus two markets whose primary merit is their lack of correlation, it will select the former every time. Stops are set within the system and vary by market based on historical volatility and the value of each contract. MI may trade options on futures utilizing any of the following strategies: Buying Naked Calls or Puts, Buying and Selling Vertical Spreads, Buying Calendar Spreads, Writing Covered Calls and Puts, Selling Double Credit Spreads, Buying Back Spreads, Buying and Selling Straddles and Buying Ratio Spreads. MI may utilize these trading strategies in the right circumstances in order to reduce account risk, enhance returns, and/or take advantage of volatility-based opportunities. MI
will work with the investor to design a portfolio that meets his or her
objectives. However, if the resultant portfolio is insufficiently diversified,
MI reserves the right to refuse to accept the account for management. |