Trading Description:
The Diamond Enhanced Solutions (DES) Program offers a combination of the Enhanced S&P Program (ESP), as described below, in conjunction with short-term trading systems in three typically non-correlated systems to provide diversification of markets traded and applied time-frames for a comprehensive approach and reduced volatility.
The Enhanced S&P portion of the program trades the U.S. domestic large-cap stock sector via S&P 500 futures and its options. It's a systematic, proprietary rules-based investing program seeking sustainable, long-term growth for investors by combining proven, low-correlation systems: trend-following, trend reversal and premium capture. The Trend Following System uses a method of trading which seeks to establish and maintain market positions based on major price movements. The system determines whether the S&P market is in a bull or bear trend, then trades with the trend until a stop condition is reached. While the core of the trend following system is long-term in nature, proprietary short-term counter-trend system signals may be used to exit a position, create a neutral position, or trade against the trend on a short-term basis. The Premium Capture System consists of writing deep out of the money covered and/or uncovered options to capture premiums, providing a more balanced and predictable source of returns. (Option positions may also increase the risk of market exposure.) Every period, options that meet proprietary risk parameters are written with the goal being to capture the premium by letting them expire, or occasionally by purchasing them back at a profit. Strict risk controls are used to limit the downside risks and achieve a desirable risk/reward ratio.
The Short-Term Trading systems within the Diamond Enhanced Solutions Program (DES) actively trade the crude, gold, and S&P futures markets and selectively trades these markets over a short-term time horizon. The gold and S&P futures will utilize the micro, or in some cases depending on account size, the mini sized contracts. In the case of crude oil, positions are only held intra-day with no overnight exposure and utilize both regular crude and mini crude futures depending on volatility and account size. Signals are generated off a macro directional indicator, then filtered for executed trades. The gold trading is more short-term trend following in nature, while the actively traded crude futures trading tends to trade both as short-term trend following and counter trend to the macro directional indicator. The short-term S&P futures related to the short-term trading system typically utilizes micro ES contracts for limited exposure and is designed to trade overbought and oversold opportunities in the S&P index. Positions are initiated after an indication of a “bottoming†process in the case of an oversold market, and “topping†process for an overbought market. Positions tend to last on average 2 weeks until market prices become more neutral, or is stopped out in the case of continued selling in an oversold market, or continued buying in an overbought market.
The short-term trading in these systems has historically been negatively correlated to Diamond’s ESP strategy based on hypothetical back-tested trading beginning in October 2009, when the ESP began trading client accounts.
Risk Strategy:
N/A
Background:
M. Kelly Farrell has over 34 years of investment experience. In June 1987, she began her career as an assistant to three executive securities brokers at Prudential Bache Securities in Milwaukee, Wisconsin, which provided sales and trading in US and foreign equity securities. In March 1989, Ms. Farrell left Prudential Bache Securities LLC and joined the Institutional Custody Department at Firstar Bank, N.A., as an Institutional Custody Service Representative. She assumed a management position in 1992, supervising Institutional Custody Service Representatives who had the responsibilities of interfacing with over 200 Registered Investment Advisors, providing short term cash investments, portfolio trade settlements and various other related institutional custody services. Ms. Farrell became the Trading Desk Manager and General Securities Principal for Firstar Investment Services in May of 1997, where she supervised Registered Representatives on both the fixed income institutional sales and trading desk, as well as the retail brokerage-trading desk. Ms. Farrell assumed the lead trading position as the Fixed Income Product Manager for Firstar Bank's Fixed Income Department in February of 1998. Ms. Farrell moved directly into institutional sales for Firstar Bank's Fixed Income Department in January of 1999 until January 2001, working with correspondent banks, trust accounts, money managers, mutual funds and high net worth individuals, increasing sales revenue by 500% in 2000. She also assisted the Fixed Income Product Managers perform various trading functions. During this time, from January of 2000 through December of 2000 Ms. Farrell also acted as a General Securities Principal for Quasar Distributors LLC (division of Firstar), a mutual funds distributor, in a consultative capacity, and to provide managerial and principal back up. In connection with her registration as a Registered Representative and General Securities Principal, Ms. Farrell passed the Series 7, Series 24 and Series 63 licensing examinations. Ms. Farrell left Firstar in January of 2001 to form Lochlan Capital Management. After January 2001, she worked on developing an option trading program and offered that program to clients of Diamond Capital Management in November 2002. In July 2001 Ms. Farrell passed the Series 3 and was registered as a NFA Associated Member. Ms. Farrell became registered as an Associated Person ("AP") and became listed as a trading and operational principal of the Lochlan Capital Management LLC, a registered CTA, on August 10, 2001. In addition, Ms. Farrell became registered as an AP of R&S Investment Services LLC, a registered CPO, and as an AP and trading principal of Inlet Asset Management Inc, also a registered CPO, in August of 2001 until February 2002. Ms. Farrell remained a NFA Associated Member until February 25, 2002 at which time she withdrew to form Diamond Capital Management. Ms. Farrell became registered as an Associated Person ("AP") on November 12, 2002 and became listed as a principal of Diamond Capital Management on November 11, 2002. Ms. Farrell became registered as an Associated Person ("AP") of Cauldron Investment Co LLC, a registered CTA with a 4.7 exemption, in March 2013 until April 2014. Ms. Farrell acts as both an operational and trading principal.
Alan Hu graduated from UC Berkeley in 2006 with a Bachelor of Arts in Interdisciplinary
Studies focusing in economics, statistics, and psychology. Pursuing an interest in the booming game industry, he started his career designing complex core systems for a number of computer and mobile game startups in Silicon Valley. From December 2010 to September 2012 Alan worked for Idle Games as a Lead Game Designer, and from November 2012 until July 2013 for The Playforge as a Senior Game Designer. After 7 years in the game development industry he decided in a change of direction, taking an opportunity to apply his analytical and statistics-based skills towards investment management. Alan joined Cauldron Investments and Diamond Capital Management in October 2013. In September 2013 Mr. Hu passed the Series 3 and was registered as a NFA Associated Member. Mr. Hu became registered as an Associated Person of Cauldron Investments LLC in October 2013 and later became a branch manager in September 2019. On April 29, 2016 Alan became listed as a principal of Diamond Capital Management and of Cauldron Investments LLC. On February 19, 2019, Alan became listed as a branch manager and Associated Person of Diamond Capital Management and withdrew as branch manager and Associated Person of Diamond Capital in November 2019. Alan revamped Cauldron's organizational infrastructure, codified the subsystems of Cauldron's SIP and Diamond's ESP programs, and continues to develop those programs through perpetual research and analysis. Since 2014, he has primarily focused on trading, risk management, research and product development for the ESP program, playing a key role in the continued success of the program. Mr. Hu acts as trading principal for Diamond Capital Management. Mr. Hu's principal status for Cauldron Investments LLC was withdrawn on April 3, 2020. In addition, Mr. Hu's branch manager and associated person statuses for Cauldron Investments LLC were withdrawn on February 19, 2020.
