November – December, 2011

These were pretty miserable months in the wheat market. Volatility seems to have fallen away a bit, which causes the strategy to perform poorly.



With a 7.6% loss in November, followed by a 15.8% loss in December, our profit figures took a hit. We are, of course, still showing a healthy profit, but we are off the stratospheric highs we experienced earlier in the year.


One never knows when volatility will return. When it does, this strategy can react very quickly and move to new highs, as we saw from the period between January and April in 2011 when the return shot up from 41% to 100%. Our drawdown (the drop from the account’s high point to its current balance) is currently about 22%, which is well within the normal variation we might expect with this strategy. Nevertheless, it is never pleasant living through a drawdown!


We do have another similar strategy in the beans market which has performed better over quite a long period of time. I am considering the merits of switching into that strategy at the end of January, on the two-year anniversary of this project. I don’t like switching strategies because I believe that Murphy’s Law generally applies – the moment I switch out of wheat, the market improves, while soybeans run into a bad spell! So, while I have been considering switching for a while now, I haven’t made any firm decision yet.




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