Investment Process

At LJM, we firmly believe that a key component to the success of our investment process is maintaining a disciplined approach. LJM places confidence in discipline, incremental trading, and dynamic rebalancing to create desirable risk/reward profiles in varying market conditions. 

We actively manage our portfolio through real-time scenario analysis and through a combination of quantitative tools and a discretionary approach, navigating a portfolio of options on the S&P 500 through extreme market events to create positive returns over the long run. Ultimately, we aim to deliver an uncorrelated, highly liquid alternative investment solution for each client's desired risk/reward profile. At LJM we value the importance of co-investment and fully invest our own capital alongside our clients.

Investment Committee Meeting

Daily Review:

Macro Outlook & Events

Markets

Portfolio

Outcome:

BP Return Target

Portfolio Adjustments

Portfolio:

P&L

Scenario Analysis

Risk-Mitigation Trades

Revenue-Generating Trades

Risk Management

Option Selection:

Revenue-Generating Trades

Risk-Mitigating Trades

Investment Committee Meeting: The investment committee meets before markets open to review the current portfolio, analyze the current market environment, and discuss the macro outlook and potential impact of events. The outcome is a plan of action for the day’s trading, including a target adjustment to the long-term basis point return target. In most markets, LJM aims to incrementally add to the strategy’s potential return daily.

Portfolio Adjustments: As markets react throughout the day, the portfolio team looks for opportunities to select trades that positively affect the portfolio’s risk/reward profile based on empirical data. Option strike selection for both revenue-generating trades and risk-mitigating trades is based on the Portfolio Management Team's 17 years of executing volatility strategies.

Risk Monitoring: LJM uses real-time scenario analysis to monitor portfolio exposure as market levels and volatility levels change throughout the day. Chief Risk Officer, Arjuna Ariathurai, monitors potential profits and losses based on the most probable market scenarios and recommends trades to keep risk tolerance targets in line. Arjuna works closely with Chief Portfolio Manager, Anish Parvataneni, to select the optimal revenue-generating and risk-mitigating trades. LJM also stresses the importance of patience and discipline when it comes to risk management for volatility strategies. Through our years of experience, we recognize the value in accepting short-term volatility to target higher and smoother returns over the long term.