Investment Style
Oxeye strategies are designed to sell volatility using a combination of futures and options contracts on a variety of asset classes traded on Regulated Investment Exchanges worldwide. To date Oxeye clients are exposed to strategies trading Eurex/Liffe FTSE 100, Nymex Crude Oil, and the CME Euro Fx contracts. All are highly liquid with no OTC derivatives used. The Oxeye Asset Allocation Strategy combines all three strategies based on an asset allocation mix derived from each market’s Implied Volatility (IV).
The strategy is based on 2 main concepts:
- Markets make most of their moves on a very small percentage of trading days and spend the rest of the time in a definable trading range.
- If we can predict a range most of the time and sell wasting assets that straddle the range we should make money as long as the range holds.
A third concept contributing to the profitability of the Oxeye investment style concerns the willingness of investors to pay for risk transfer.
Many investors use options as a form of insurance. ‘Long’ strategies in particular can easily be hedged against a downside move by employing some form of ‘put’ buying strategy. Bullish investors may buy options to take out a geared long play so that if their strategy does not work out they are less out of pocket than if they had committed to a full cash underlying long position. The cost of these strategies is similar to paying an insurance premium, whereby the insured person is happy to pay for cover as part of his annual overheads. Oxeye acts like the insurance underwriter taking on the risk and then reinsuring that risk. As long as the value of claims does not exceed the value of premiums written a profit will have been made.
So, to recap: the Oxeye approach is to:
- straddle a predetermined range set by the market with a high statistical chance of profitability
- sell options to create an income stream
- profit from time erosion
- actively manage the risk
and as can be seen from the performance record, this approach has been consistently profitable.
To view the Oxeye Presentation click HERE.