Meet The CTA: Adkins Diversified Capital

             

In this issue, we talk with we talk with Scott Adkins of Adkins Diversified Capital a registered Commodity Trading Advisor.
 

To see the Adkins Diversified Capital performance sheet please log on to the IBTRADE Alternative Investment Database.

 

Name of Program:

Adkins Diversified Capital / Diversified Options Program

Name of Principal: Scott Adkins

NFA ID:0430634

Who are the principals with trading authority?

Scott Adkins

Can you provide details on the principal and/or managers' education, career and trading background?

Scott Adkins has a B.A. in History from Central College. Scott Adkins joined the Peregrine Financial Group (PFGBEST) team in May 2001 as a Customer Relations Manager. This position also gave Scott Adkins the knowledge of PFGBEST products as well as the tools needed to advance in the futures industry. In 2002 and 2003 he transitioned from Customer Relations Manager to a full-service broker, becoming an Associated Person in August 2002 and a Branch Office Manager in July 2003 of Wasendorf & Son Company, which was a Guaranteed Introducing Broker for PFGBEST. In January 2003 he registered as an Associated Person of PFGBEST and a branch office manager in July 2003. Scott Adkins ceased being an Associated Person and Branch Manager for Wasendorf in October 2007 when Wasendorf ceased operating as an introducing broker. Scott remains a registered Associated Person and Branch Office Manager of PFGBEST.

During his tenure as a broker Scott built a book of business working with retail clients from around the world advising them on the day-to-day activities of the markets. Joining the Wealth Management Team as a Senior Wealth Manager Scott brings his knowledge of the markets and risk management skills to bear working with clients on asset allocation and over-all market strategies as well as advising clients on Broker Assisted Strategies.
 

How do you divide your time and priorities between your CTA responsibilities and your Wealth Management Group duties?

With the trading strategy that I am following it comes down to time management and priorities. I have a schedule that I follow on a daily basis and the markets are always in front of me. The CTA responsibilities come first and foremost. However due to the nature of the style of trading I employ I am afforded time management flexibility, for example if I have trades on that are slowly decaying and things look good, I can devote more attention to my Wealth Management Group duties. The attention to detail of the trades and the structure of my daily schedule really help me balance the two sets of duties, however the CTA is my highest priority.

Which firm collates your performance numbers?              

Futures Accounting & Compliance

What is the minimum investment for your programs?

$30,000

Do you accept notional funding?

Yes, subject to approval of Adkins Diversified Capital.

What is your management and incentive fee structure?

Adkins Diversified Capital has no management fee. We have a 30% incentive fee.

What is your program's capacity?

Approximately $50 million.
 

When did you start trading this program?

March of 2009 / The Commodity Trading Advisor (CTA) registered in August 2nd 2011.

What type of accounts do you manage?

Mostly individual clients at this time. A few corporate accounts.

Can you give a brief description of your program?

Short Options Strangle Strategy attempting to diversify across different market sectors. This is a relatively non-directional strategy. We will make risk management adjustments as the net delta becomes too directionally bullish or bearish.

Do you have a systematic or discretionary approach to the market?

I use a systematic approach for trade selection but opt for a discretion approach to actual trade entry. Sometimes a computer-generated signal cannot adequately account for an atypical external risk event.
 

What is the average holding period for each trade?              

Our sweet spot for trades tends to be from 45 to around 85 days.
 

Do you trade options within your program? If yes, please describe the types of options traded and how options risk is monitored.

Yes we are an options selling strategy. Specifically short strangle strategies. We monitor the net delta of the position in an attempt to be relatively delta neutral. Too bullish or bearish we will make an adjustment. Adjustments may be adding puts or calls to bring the trade closer to neutral. We many buy back a put and sell a put further away from the market and also add a call, we may roll out the options to the next available options contract. And also in rare instances, we may use futures to hedge the position.
 

Are there any liquidity constraints in the markets you trade?

Yes we like to have the trades in markets with decent liquidity in the outlying options. Markets that we have traded are live cattle, bonds, notes, currencies, natural gas, crude, gold, corn, beans, wheat, E-mini S&P, sugar, et al.
 

In what types of market environments does your trading program do well and /or struggle?

We typically do well in markets that have a higher than normal Implied Volatility. We struggle to find trades that meet our guidelines when I.V. is low.
 

What is the standard range of margin to equity usage for the program?

We attempt to maintain around a 50% margin to equity ratio. If we are struggling that could be higher as we increase the size of trades or lower when we are underinvested.
 

How do you manage risk/reward and what metrics are employed?

We like to have a decent annualized return on trades. Usually if we are receiving anywhere from $800 to $400 in premium that meets our guidelines. The goal of the program is 20% for the year.
 

What are your investment goals?

The goal of the program is to return 20% for the year.

What makes your program unique and different from other managers in your sector?

I think our attention to detail and effort to diversify our trading among a number of different markets. We attempt to stay relatively delta neutral, and like to have non-correlated trades on if we can. I also think our attention to risk management and ability to make adjustments to trades sets us apart.

What is the one piece of advice that you would give to a new start-up Commodity Trading Advisor (CTA)?

Don't do it!!! No really I think if you are looking to start a Commodity Trading Advisor (CTA) you really need to fully test the strategy and look at it from the 10,000 foot level. Not every strategy is going to work well in all markets. You need to be aware that sometimes it is better to be under invested, than to be reaching for trades that may not necessarily work for your strategy. Stay true to your guidelines and yourself.
 

THERE IS A SUBSTANTIAL RISK OF LOSS IN TRADING COMMODITY FUTURES, OPTIONS AND OFF-EXCHANGE FOREIGN CURRENCY PRODUCTS. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.