Breaking News

    John Lothian NewsRT @JohnLothian: Blockbid Step Up Beta Phase With Live Trading - Users Are Able To Trade Freely During The Next Phase Of The Blockbid Beta…
    John Lothian NewsRT @JohnLothian: Powerful Crowdsourcing Technology Enhances Bankruptcy Prediction https://t.co/QGpsvqjSVj
    John Lothian NewsRT @JohnLothian: CFTC Revokes FBOT Registration at the Request of ICE Futures Canada, Inc. | U.S. COMMODITY FUTURES TRADING COMMISSION http…
    John Lothian NewsRT @JohnLothian: CFTC Orders Futures Trader and Trading Firm to Pay $2.3 Million in Penalties for Cross-Market and Single-Market Spoofing a…
    John Lothian NewsRT @JohnLothian: Bringing iPhone Assembly to U.S. Would Be a Hollow Victory for Trump - The Wall Street Journal https://t.co/X33faEjKa9
    John Lothian NewsRT @MarketsWiki: CryptoMarketsWiki Page of the Day: Exchanges Several cryptocurrency exchanges were found to have poor transparency, "serio…
    John Lothian NewsRT @MarketsWiki: MarketsWiki Page of the Day: ICAP to pay $50 million civil penalty in settlement with CFTC over attempts to manipulate the…
    John Lothian NewsRT @JohnLothian: Goldman names Dan Dees as new investment-banking co-chief: Bloomberg - Reuters https://t.co/jdHlX3nrJp
    John Lothian NewsRT @JohnLothian: A new antenna using single atoms could usher in the age of atomic radio - Ars Technica https://t.co/vUr2t6zxsz

Thomas Rollinger of Red Rock Capital Explains the Trouble with Trend Following and Why He Likes Sortino Ratios

Thomas Rollinger has a unique perspective on the markets.

As the managing partner and chief investment officer of Red Rock Capital, Rollinger joined the managed futures firm in March after being a long-time customer of the firm. But Rollinger also has an interesting background, as a student and colleague of Edward O. Thorp, who is also known as the “godfather of quants.” Rollinger co-developed and co-managed the systematic futures strategy which Thorp called “System X,” which was featured in Scott Patterson’s “The Quants” and well as in Jack Schwager’s book “Hedge Fund Market Wizards.”

Rollinger now works alongside Red Rock’s founder Scott Hoffman and helps run the 10-year-old Chicago-based firm’s programs which include: the Systematic Global Macro and the Commodity Long/Short program, which was launched just a few months ago.

JLN Managed Futures newsletter editor Jim Kharouf spoke with Rollinger about his experience and lessons learned from Thorp, as well as what’s been hampering trend followers as well as why the Sharpe Ratio doesn’t isn’t better than the Sortino Ratio.

For Rollinger, the Sortino Ratio is a better representation of downside risk, as it measures only the downside volatility in an FCM’s portfolio. The Sharpe Ratio, on the other hand, represents volatility on both positive and negative returns, which is a limited measure of a firm’s performance. Rollinger and Hoffman have written a paper on the topic as well called “A Sharper Ratio.”

One of the other points Rollinger makes is that the KISS model still works in trading. To Rollinger, as an investor, too many CTAs today are bending their programs to work within today’s choppy and less volatile markets. And that can complicate and skew results for a trading firm in the long run. Rollinger says boiling down a trading system to its most useful components is his goal as a CTA.

Tom Rollinger Resources

  • Tom Rollinger on MarketsWiki (link)
  • Red Rock Capital website (link)

0.00 avg. rating (0% score) - 0 votes

About Author