Meet the CTA - Crescent Bay Capital Management, Inc
In this issue we talk to David Bedford of Crescent Bay Capital Management, a registered CTA, NFA ID #345919.
To see the performance sheet for the Crescent Bay Capital Management, please log on to our Managed Futures Database from IBTRADE.
Name of Program
Crescent Bay Capital Management, Inc- NFA ID #345919.
Name of Principals
Name of Principal with Trading Authority
Q: Can you give a brief description of your program? Do you accept notional funding?
We have 2 programs:
PSIP - Traditional option selling strategy.
BVP - Proprietary Theta-Differential strategy. Sells options in front month, buys options in back month and makes profit from the time diffential.
We accept 75% notional funding. 75k traded as 100k.
Q: What is the average holding period for each trade?
Q: What is the current capacity of your program? Do you intend to significantly raise this number this year?
PSIP - $75 mil
BVP - $100 mil, however we intend to begin a Multi-Strike program that will increase capacity to 500 mil.
If we begin to see that trade slippage is significantly affecting returns we will begin a slow close of program.
Q: Can you briefly describe the proprietary algorithms that you use to generate alpha?
PSIP - profit generated from inherent time decay associated with options.
BVP - Theta Differential Strategy, best analogy is that we sell expensive insurance, then buy less expensive re-insurance making the difference. We can explain in more detail if desired.
Q: The program performed fairly well in the starting year of 2006. What factors contributed to this success?
BVP strategy is truly unique.
Q: We've noticed that 2008 was an overall poorly performed year, in which the program presented a negative figure. Drawdowns frequently occurred in that year. Was there any systematically intrinsic factor regardless of the market depression at that time?
Volatility was the issue. Since 2008, we have introduced the SZI (Safety Zone Indicator) that prevents us from trading when volatility is expanding quickly.
Also, we have implemented a new trailing stop in Dec. 2011 that has shown in our research to reduce drawdowns and increased profits. Increase Sharpe Ratio.
Q: In what types of market environments does your trading program do well and /or struggle? Or your program is basically market neutral?
Basically market neutral with a small bias to a bear market in the stock index.
Q: What's your opinion on current agricultural markets and how do you prepare against the volatility?
We don't trade Ag.
Q: Besides selling OTM options on the S&P 500 index and collecting premium from it, do you intend to increase some other strategies?
Our next program will be based on the BVP that will take multiple positions (Multi-Strike Index Program) at different market levels and expiration periods. Our research has shown that there is a significant decrease in account volatility. (Smoother Equity Curve) Launch will be in 2013.
Q: What are your investment goals for this year (i.e. annual returns on performance)?
Our goal in both programs is to profit 20% annually with less than a 20% max drawdown.
Q: What makes your program unique and different from other managers in your sector?
PSIP has traded for over 6 yrs with a max drawdown of 24%.
BVP uses a unique theta-differential strategy and experienced a max drawdown in 2011 of -12.36%, whereas; a number of other managers in our sector Blew Up! Also, allowable Commission/Equity ratio is higher than most other managers.
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