Yesterday we had the pleasure of meeting with Scott Sykora (President) and Fernando Anton, Ph.D (Managing Director, Head of Research) of LJM Partners.
Their original Neutral S&P Option Premium Program is the longest running S&P option trading strategy we know of in the industry. Getting their start in July 1998 (starting 2 months prior to the fall of Long Term Capital Management) they were faced with challenging market conditions from day one which, according to Scott, has helped them to grow as a firm / risk manager. Fast forward 10 years to 2008 the Neutral S&P Option Program faced another challenging market environment which ended up costing them 63.83% – the exciting news is that, with the inclusion of enhanced intraday risk management techniques, the program has nearly had a full recovery from the drawdown by returning +50.17% in 2009 and +38.20% in 2010.
Does LJM Partners have an edge? Fernando’s belief is that LJM Partners unique approach of collecting premium every day of month differentiates them versus most option sellers who either a. sell on a specific date (xx months til expiration) or b. at a specific price (targeting xx in premium). We can see the appeal of this, as LJM does not have to correctly forecast when the premium is at its highest. A sort of dollar/cost averaging.
We wish LJM Partners the best of luck returning to the 2008 highs for the Neutral S&P Option Program, and are enthusiastic about their Preservation and Growth Program, as well as the new products they are working to launch later this year.
The above said, we remind our readers of the risk of selling options and the importance of including them as a “PORTION” of the investment portfolio – Don’t forget “The Turkey.”
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