A Closer Look at the Adaws “Hedge Fund”

A hedge fund can be invested in virtually anything, short and long-term alike.

If you've ever heard the term hedge your bets, you should now have a slightly better idea of what a hedge fund does.

At Adaws, we offset portfolio risk with a different kind of risk, and one of the ways we monitor this is via a daily stress test report. The report simulates scenarios of between -30% to +30% changes in the underlying price of each of the portfolio's positions.

Profiting with Options Strategies

Adaws Eagle Fund uses a range of options strategies to generate absolute returns. The more commonly used are credit spreads, strangles and straddles.

option strategies

Instruments Traded

The Fund trades the S&P500 Index, the Russell 2000 Index and various other indexes, ETFs and large cap companies. Only high volume instruments with decent open interest are traded. We want our positions to be liquid, and so open interest is an important metric to consider.

Taking this approach allows us to provide predictable results to our clients, whilst giving them the potential for significant growth and limited risk.

Sizing and the Trend

Managing risk through position size is important. Typically a maximum of 5% of assets under management (AUM) are allocated to any one position.

We trade with the trend, but always with caution, quickly adjusting the portfolio when a change of trend is confirmed. Fighting the trend is a loser's game.

In A Nutshell

The knowledge of what to trade, position size, and strategy employed comes from years of experience, technical analysis, past market performances during certain times of the year, and overall trade conviction. When you do it long enough, you see that the market tends to be a self fulfilling prophecy.

The world of finance can be a great place to spend time, if you have the desire to learn and are working with a talented, experienced team. I chose to keep this article simple, but thought it might be nice to share a brief primer regarding options strategies employed and why Adaws Capital, LLC employs them.

If you have any questions, reach out to us here, and we would be more than happy to discuss.


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