LOMAX Investment Methodology
The LOMAX PROGRAM is an option writing trading method that targets a low and consistend monthly profit combined with a second return element that is generated event driven. Base return refers to a low monthly profit target in low risk short option positions, while the event-driven part of the strategy seeks to take advantage of sudden increases in volatility either by positioning pre-event spreads or by using the post-event increase in premiums to sell far out of the money options.The program trades in markets of lower or declining volatility. In range-bound markets LOMAX will generally just write wide strangles. In trending markets LOMAX will either write single options behind the trend, or will establish low risk, hedged ratio spreads that benefit from a continuing trend. When fundamental and technical analyses agree that a certain UC is range-bound, but moving in waves between support and resistance levels, biased strangles will be written. LOMAX is using stops on exposed positions, either on the option itself, or, at lower option liquidity, on the UC. No position exceeds 10% of account equity.For option trading CKP LOMAX typically uses a margin to equity ratio of about 30 to 50%, based on net account value of fully funded accounts, or based on nominal value of notional accounts.
The long range profit target is shown in Figure1 as the line extending across the entire graph. The monthly profit target was set at inception as 2.93%, which, if maintained for 24 months, would result in a 100% profit at the end of 2 years. The performance of the first 24 months is in line with target expectations.
Klaus W. Schatz
Zythusmatt 12
CH-6330 Cham / ZG
Switzerland.
telephone number +41-41-781-3878
fax number +41-41-780-1821
e-mail: klauswschatz at yahoo.com