AI profile: Pirates await chance to rehoist the Jolly Roger
Volatility creates opportunities but, in the case of some strategies, high levels can be lethal. Helen Avery talks to the founder of CTA Pirates of Profit about how risks need to be fully understood.
"E-trading is a wonderful thing but it has led to huge intra-day swings due to increased speculator volume"
"It was Pirates of Profit or Merciless Mercenaries. But the latter was a bit of a mouthful," jokes Paul Brittain, the founder of CTA Pirates of Profit, when explaining the unusual choice of name. Brittain maintains a sense of humour but the present market environment has had serious consequences for Pirates of Profit, which follows a strategy dependent on low to moderate volatility in the commodities markets. In January, Brittain was forced to stop trading, and is now waiting on the sidelines. Brittain registered the independent CTA in June 2006, having run the strategy on a broker-assisted basis for several years, averaging monthly returns of about 4% to 6%. "We were selling strangles and up to that point it had been easy to do – almost too easy." Shorting strangles is essentially selling an out-of-the-money call and an out-of-the-money put in the same stock or commodity with the same expiration. If the underlying commodity moves little (stays within the strike prices of the short options), then the CTA benefits.