Caerus Grain Program

Derivative markets are not efficient markets from economics textbooks. Centralization and focus on trading expectations and interpretations, rather than real things, make them prone to behavioral biases and manipulation. The problem with straight selling vol is that you're prone to blowups, you make money until you don't, then you lose 100% and the fund manager just skates off and leaves you with the loss, having collected fees from you for years. We've improved on that model, we monitor skew and volatility as well as price, waiting for the optimal time to initiate a trade, never net short options. We take advantage of mispriced option spreads, often trading them at a ratio, where we can capitalize on theta decay while also creating a position that has positive gamma should a black swan scenario arise. The best part is that the account fluctuations are more stable, and the margins are lower than a straight vol selling strategy.

Our Approach

The Caerus trading approach is a spreading strategy that captures mispricing between options. The program utilizes a variety of techniques, depending on market conditions, to sell overvalued options, and buy protective options at a low cost. Our aim is to capture outsized theta decay based on the temporary mispricing of options in the market. Most of the time this is done on a ratio with a long bias, at worst, we are net flat options, never net short. When market conditions only allow us to be flat options, we strive to seek risk-reward ratios that are favorable and will reach our target on a high percentage basis.

Our Method

We have pared down our experience as prop traders into what we believe are the highest probability trades. We are options sellers that don't net sell options. We implement strategies where we are collecting theta but are not net short options. we do this by utilizing a variety of strategies that vary based on market conditions. we look at volatility, spread volatility, skew, and a variety of fundamental and technical analysis to put on a high probability winning trade with a low-risk reward. We Target a 1-2% profit on each trade and each trade risks 1-2%. Our objective is to "hit singles," attempting to maximize the number of winning trades rather than swing for the fences with a fewer number of big winners.  The best part is that most of the time we are actually net long options, so should the market volatility increase, or the market move against us, not only are we protected from loss, but we have the potential to profit.



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This report and website include information from sources believed to be reliable but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition.