FW: Representative Volatility Trades

 

 

 

Jeffrey,

 

Bruce told me that you wanted to see examples of specific volatility trades and how they performed upon maturity.  Please find attached a three-page memo which describes two representative trades, the first put on in a “normal” environment before volatility spiked last July and the second after volatility was already high.

 

Speaking very generally, trades put on which mature in a “normal” market with moderate volatility aim to earn 200% to 300% of the capital at risk.  Trades put on in a market of high volatility such as we are currently experiencing aim to make about 100% of the capital at risk.  By risking only 10% of our total capital base, we aim to generate 20% to 30% returns on the entire portfolio during typical flat or rising markets and 10% returns in falling markets.  Both historical and current market pricing data are consistent with these targets.

 

I look forward to meeting you today at 3:00 PM and hearing your comments on this material.  Thank you again for your interest.

 

Regards,

Duncan A. Yin

 

Work:  (203) 569-4524

Cell:  (203) 856-8148

 

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