JF Capital Monthly Report February 2012

Monthly Report February 2012

As another good month and our first quarter come to an end we reflect on what has been an exciting start for JF Capital UK. With, active months, month-on-month returns of over 2% in our 'Beta' stage of testing we look to increase our targets of 2% m-on-m to a slightly more ambitious 3.5%, which we believe is definitely achievable through the increase of our leverage in positions and continued broadening in the JF trader base.

Below is a cumulative NAV (net assets value) of the fund in percentage increase from 27^th January to 3^rd March 2012. Due to data availability issues (teething problems!) we are unable to provide a continuous NAV graph and therefore rely on NAV at the close of trades, in % on month-start.

The first major (stop loss at approx 2% risk) trade this month came on the 27^th Jan with a short on JPY at 76.6 to 76.9. This came at a nice technical level with support in the mid 76s and fundamentals reinforcing this viewpoint, hence our choice for a high level of risk on the table. By 31^st Jan this trades exposure was reduced by a half (1), believing in the trade but sceptical about the timing, leading to a negative P&L on the trade and an YTD NAV of near 0%, this continues until we exited our SPX position, from Jan, at (2).

It is worth pointing out that this point (9^th) we are 1% NAV (actual) MTM, but this is not displayed due to the graph being realised positions only.

As the middle of the month approaches, (3), our JPY short really starts to take hold as USDJPY hits 78.5, with shorts on EURUSD to mitigate wider Dollar risk. This gain is partly realised (4) when the USDJPY and EURUSD positions are reduced by two thirds. Gains occurred due to a BoJ injecting JPY10trn of QE in a helicopter drop of money together with continued threats to control their currency and deliver a sustained level of 1% inflation. These positions are also marked on the graph USDJPY graph below, including the reducing of our position size at 5 or 78 for the USDJPY.

Also (5) the closing of our XAUEUR position, with loses on the EURUSD due to positive news in Greece and gains that out weighed this loss on the XAUUSD, hence the outlier event for cumulative NAV.

On the 29^th Feb with the LTRO2 on the horizon the fund took the view that we will see a drop in the EURUSD and decided to buy a March EURUSD put option at a strike of 1.31 at a cost of 25pips.

As the new month starts our new put option looks inspired, with the NAV on the remainder of our USDJPY position and option at 1%, this former position is closed on the 2^nd at 81.67 up from the original purchase price of 76.xx playing to the strategy of averaging out so as to protect the fund from large losses (and gains) at the peaks and troughs.

It is worth noting that the 1.31 EURUSD put has not been closed but has been added to the chart at its NAV so as to show the value at month end of an increase of 2.305% on the month.

Summary

All in all a good month for this young fund, although the USDJPY position did cause some pain at the beginning of the month the analysis was proved correct. Coupling this with good moves in the gold market and a helpful LTRO we saw a positive end to the month.

Going forward we will hope to continue to be long in gold as a hedge to “global central bank balance sheet exposure” as March continues. In terms of JPY, it would seem unlikely for us to open another position until USDJPY hits the high 70s again. JF hopes to make a move into single stock market as equities continue to rally (FTSE up 6% in 2012).  

In terms of administration we continue to strive to find the most useful platform for our trading, CMC has been useful for our CFD trades and provides a low spread of 0.7, however the poor data feed and lack of options has lead us to explore other options as we move into the future.



Author Details


This report was written by a JF contributor not directly involved in placing any of the trades/actions listed above for the aim of trying to objective. To raise any issues or ask any questions please feel free to get in contact with the team by commenting or emailing JFCapitalUK@gmail.com