Zenith Resources

Overview

Zenith is a Commodity Trading Advisor whose managed futures investment strategies are to sell options on the S&P 500 stock index futures contract. They primarily sell uncovered or naked options, although credit spreads are utilized at times. This is a niche investment strategy with a number of unique advantages. Although option writing has become more popular, this type of trading program is still not widely used.

Zenith’s investment program is based upon 15 years of observing trades in put and call options. During that time the conclusion was come to that buyers of puts and calls generally lost money on their trades, often losing the entire amount they had paid to purchase the options.

Since Zenith concluded that options buyers usually lose money, they designed a risk based system to consistently and systematically sell options. Zenith does not sell options based strictly on the premium available; rather they sell options based on the statistical risk of a given strike going “into-the-money”. The S&P 500 index futures contract was chosen as the primary investment vehicle, due to its liquidity, contract size and the percentage distance “out-of-the-money” that strikes could be profitably traded.

Selling uncovered options on a stock index does require the use of leverage and unlimited risk. Zenith’s risk controls include placing a limit on the number of options they sell and setting prices in advance at which they would hedge or close out the positions. All options sold are “out-of-the- money” options, which means the S&P 500 must move against the option by the amount that it is “out-of-the-money” before there will be a loss at its expiration. This provides a built-in margin of error for moves against short option positions.

Snapshot

• Over $100MM under management

Benefits

• A strategy designed for up or down markets
• Liquid investment
• Available for retirement accounts including IRA and Roth IRA

More Information

• Disclosure Document

Disclaimer: The risks associated with trading futures may be substantial. Only those emotionally and financially prepared should invest. There is risk of loss when trading or investing in Futures and Options on Futures. The information contained herein has been obtained from sources believed to be reliable; however, there is no guarantee to its accuracy or its completeness. There is no assurance that any reader who uses this information contained herein will achieve favorable results. The authors and providers disclaim any responsibility for any consequences that might arise directly or indirectly from the use thereof. Any mention of performance in any context whether actual or hypothetical is no guarantee of future performance.