CTA Interview: Protec Energy Partners, LLC

Name of Program
Protec Energy Partners LLC

Name of Principals
Todd Garner, Andy Greenberg

Name of Principal With Trading Authority
Todd Garner, Andy Greenberg

Q1: As an excellent fund manager in the industry, what special trading style do you use in this program?

Our style of trading is commonly referred to as “discretionary trading”. We use our 25 plus years of experience in the physical petroleum and natural gas markets to implement a “hands on” approach to managing each position. This discretionary style gives us the ability to move quickly and the opportunity to “stay the course” when further study of the market is necessary.

Q2: What is the average holding period for each trade?

Our portfolio is comprised of approximately 50% medium-term trades and 50% longer-term trades. We design the medium-term trades to be held for 30 days. The longer-term trades or seasonal trades do not exceed 120 days. We do not “day trade”.

Q3: How do you manage risk/reward and what metrics are employed, that is, what make your sharp (2.58) consistently compelling?

We use several techniques to manage risk/reward.

1. Prior to execution, risk and reward parameters are defined and options are structured around those parameters.
2. We use APO (Asian) Options which help reduce volatility
3. Stop loss limits are set based on projected intra-month drawdowns.

Q4: In the ET1 program, you mentioned the focuses are the “medium term” strategies, can you briefly describe what they are?

Our medium-term strategies consist of option spread structures, strangles and straddles. Most of the option strategies are comprised of Asian options, which align perfectly with our 30-day structures. We have also used futures to offset an open option position when necessary.

Q5: As to the specific stop loss you mentioned in the “program description”, how to target this “predetermined acceptable loss”?

The “predetermined acceptable loss” is determined by projecting an “acceptable” drawdown in the overall portfolio. That “acceptable drawdown” is calculated on a month-to-month basis using the program’s year-to-date ROR along with other considerations. Once the trades are executed, it is a simple arithmetic calculation to determine any targeted stops.

Q6: If possible, can you give a brief example of your trades using the technical analysis to help make more precisely time entry and exit strategies?

Given that each program trade employs different strategies every month, it is easier to briefly explain one of our longer-term trades that is based on seasonal pattern recognition. This strategy is based on RBOB pattern recognition. Our chart observations have helped us to recognize that RBOB makes it lows each year in the November/December time period. We use options to take advantage of the upward movement. Option strikes are determined by the calculation of Fibonacci retracement numbers, watching converging moving averages, and being alert to certain candlestick patterns.

Q7: The managed futures industry in the last year struggled in general, however, Protec Energy Partners surprisingly generated an annual rate of return of 56.31%. How did you make it?

We credit our success to several factors. First, our years of fundamental and trading experience gives us the ability to recognize trends, the courage to follow them and the discipline to exit strategies before sustaining damaging losses. Second, our discretionary trading style affords us consistency, flexibility and maneuverability. System traders are locked into pure numeric trading. Third, the use of APO’s really does help smooth out volatility. We don’t feel the need to be in and out of the market everyday.

Q8: We’ve noticed the performances for the last couple of months were not good, and the biggest drawdown (-3.78%) occurred in May, what happened to that?

In May, we saw a larger than normal decline in the crude market which affected the related product markets. This decline in crude was precipitated by global macro economic issues (prospect of Greece leaving the Euro and Spain defaulting) which forced the energy market into a steeper, faster downward move. Another factor that we continue to see is trader volatility and headline trading. We maintain that our May position was correct with regard to direction, but our calculations did not completely factor the severity of the downward momentum caused by economic fears in Europe.

Q9: What’s your opinion on the current energy commodity (physical petroleum, crude oil, natural gas…) market in a global universe?

Fundamentally we are bullish the energy market in the U.S. and abroad. But we cannot ignore the U.S. and Global economic conditions. If the economy falters, so will the energy market and visa versa.

Q10: How to keep an account’s degree of leverage relatively constant, even in volatile markets?

We adjust the leverage of each account based on the degree of volatility. Meaning, we pay particular attention to the adequate sizing of positions prior to execution. We also assess the current and anticipated liquidity of the segment of any market we enter. A concrete example would be our Q1 2012 gas play. On an investment of $200,000 for which we normally execute 8 program contracts, we executed 6 contracts due to market factors.

Q11: What is your annual objective for the performance?

For 2012, we anticipate 30%.

Q12: What is your piece of advice to investors who are interested in the energy commodity industry?

The complexity of the energy industry dictates that investors should seek the advice of seasoned, disciplined traders with proven track records. One of our favorite economist’s was quoted “the market can remain illogical far longer that I can remain solvent.” We couldn’t agree more.


For more information on Protec Energy or other CTAs, feel free to visit www.ibtrade.com


There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. IBTRADE, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.