Bayou City Capital
North American Equity Market Manager of the Year
Bayou City Capital, L.P. is a limited partnership based in Houston, Texas that trades in S&P 500 Index futures and futures options. The Fund was started in 2000 to explore an option-selling strategy utilized with natural gas storage facilities. The Fund began with friends and family assets and originally, the Strategy was utilized over various asset classes, including natural gas, crude oil, and equity markets.
Our Fund's strategy operates on two premises. First, the overall directional trend of the United States equity market is positive over the long-term. Second, options on the S&P 500 are overvalued as the future volatility the options' prices imply is an overestimate, on average, of the market volatility that actually occurs. The latter of the two premises is the more technical aspect of the strategy.
Essentially, we are writing options on S&P 500 futures at the Chicago Mercantile Exchange in a fashion that gives us positive exposure to the market's appreciation and the passage of time. We focus on options that expire in the short-term, within 90 days or less. The human discretion and skill comes in with the 'how' and the 'when' of the trading strategy's application. After the recession in 2008 and EuroCrisis in 2011, we have added strategy safeguards and adopted a more active-management mindset to reduce the volatility in returns and help mitigate such events when they occur.
Bayou City Capital has a 10+ year track record with a 23%+ annualized return. Since inception this trading strategy has delivered a monthly return correlation of 0.49 compared to the S&P 500. Last year the Fund returned 40 per cent. More recently, Bayou City Capital returned 5.3% after fees and expenses in June, raising the Fund’s 2014 performance to 20.7%. The S&P 500 returned 2% for the month, raising its gain this year to around 7%.
Robert Hay, Manager
roberthay@bayoucitycapital.com
Will Monroe, Manager
willmonroe@bayoucitycapital.com
http://www.bayoucitycapital.com