The goal of the model is to achieve highest risk-adjusted returns.
The model isn't a crystal ball. Trade signals are based on Probabilities and Statistical methods, producing different trades with differing probability of success. Overall, model is right 2 out of 3 trades.
The model is not a HFT or intraday scalping algorithm, only changing the position about 2-3x a month, on average. The model is a pure directional bet on whether the SP500 will rise or fall, which during bull or bear markets, is able to profit from not only the major trend but also sell into the minor counter-trends. The result is a system designed to beat the SP index by profiting when the market loses during pullbacks.
Underweight SPX Trading Fund
MAX 1x Long/Short
averages 42% SP position size
additional benefit of profitable short trades
Live Tested Returns
Prior to fund inception, the daily model trades were delivered via professional subscription since Jun 2013. Those proprietary results were consistent with backtested results.
Based on the improved results of the proprietary testing, along with the multiple years of monitoring the outcomes of many years of model trades in real-time, Mr. Valletutti started the investment fund in December 2015, and then pooled client funds in February 2016.
Hurdle = 3%
RF = 2.50%
Expected Market Return = 7%
Market Return = 0.946%
NOTE: Hedge fund does not follow this leverage strategy, limiting MAX position size to 100%.
What is a model?
By 2012, Michael’s confidence in his own MarketModel led him to establish a futures account and commit to trading the model signals, following the direction and probability signals of the model. Michael's trading diary moved to social media via Twitter @marketmodel, where the nightly model signals were posted, along with trading results.
The model uses SP500 futures instead of the SPX cash because of the use of leverage provided by futures. Use of leverage is typically associated with high risk, however in our case, we are simply choosing to not to tie up $1M is cash buying and selling shares of the SPX. Leverage allows for the scaling from underweight SP500 to up to 1x leveraged (100% long or short).
The model's use of leverage allows for scaling into very large account balances. For example, a $1B account could invest alongside the model within the SP futures market easily within the avg volume and open interest of today's market. The investment decisions are almost entirely systematic, based on the model's signals.
NFA ID 0267975
NFA ID 0491458
Merritt Square Financial Center
775 E Merritt Island Causeway
Merritt Island, FL 32952