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Some CTA Sharpe Ratio's > 1
www://www.catranis.com/cta24mo_sharp.htm
No1 is Arcanum Investment Management > 4 they only sell out of the money
option spreads, somewhat ironic as in any month they could lose their entire
premium and 50% of the account?
----- Original Message -----
From: "Mark Johnson" <janitor@xxxxxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Wednesday, September 20, 2000 6:45 AM
Subject: Sharpe Ratios of CTA's
> Bob Fulkes writes of Sharpe ratios of mechanical systems.
>
> Why not disuss the Sharpe ratios of CTA funds such as
> John Henry's, David Druz's, and so forth? They are
> 100% mechanical, they have a proven track record
> (audited, to boot), they have actually made money for
> clients as well as themselves.
>
> It is reasonable to expect that the very best Sharpe
> ratios are produced by the very best CTA funds -- they
> have the most experience, the most market-battle-tested
> savvy, and (very importantly) the largest research
> budgets to investigate the widest possible spectrum
> of trading system ideas.
>
> Go ahead and look. You'll find that CTA's, even the
> best of the best, the ones who test out EVERYTHING,
> have a Sharpe ratio less than 1.0.
>
> There are plenty of CTA's reading this list and
> indeed reading this very message. These CTA's are
> tracked by a variety of Managed Futures advisory
> services, some in traditional ink-and-paper print
> media, some on the web, some doing both. I will
> guarantee you that none of these CTAs will respond
> with a message, "Go look at such-and-such website
> containing my audited results, you will see that
> I achieved a Sharpe ratio greater than 3 for five
> straight years." No way, Jose.
>
> Mark Brown is a CTA, he advises a managed futures
> fund. Go look up his Sharpe Ratio to see what is
> actually possible in the real world. See if he
> routinely achieves 3 or greater. (answer: no).
> See if he even hits a Sharpe Ratio of 1 (answer: no).
> This doesn't necessarily mean Mark Brown
> is a poor trader, it means that (sharpe ratio > 1)
> is a poorly chosen threshold-of-acceptability for
> the real world we actually live and trade in.
>
> Get used to it: what can actually be realized
> using actual trades and actual fills and actual
> markets, is a Sharpe ratio slightly less than 1.
> Not 3, not 3-to-5, not greater-than-5. Less than 1.
> That's the bad news. The good news is, you can
> make >100% profits per year, even with a Sharpe
> ratio less than 1. Larry Williams proved it.
> Richard Dennis and the Turtles proved it. Michelle
> Williams proved it. You and $395 worth of Pinnacle
> Data, and $3000 worth of Trading Recipes software
> can prove it too.
>
> --
> Mark Johnson Silicon Valley, California mark@xxxxxxxxxxxx
>
> "... The world will little note, nor long remember, what we
> say here..." -Abraham Lincoln, "The Gettysburg Address"
>
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