Managed Futures: Risk Management

Since the credit crisis, fund managers have put more emphasis on managing their funds' risks.  The following managed futures article by Attain Capital lists the various methods of how Commodity Trading Advisors do this and diversify their investments.

• Money management - involves budgeting risks across different futures markets;  done by balancing the equity at risk for each trade
• Market selection - ensuring the position is liquid or using exchange traded futures to minimize counterparty risk
• Market diversification - investing in multiple, uncorrelated markets;  diversifying trades over different sectors or contract maturities
• Model diversification - using multiple trading models within the fund
• Timeframe diversification - creating trading models based on different timeframes
• Trade structure - using options to limit risk such as buying put options or spread trades
• Delta neutral - using spread trades to limit volatility
• Manager skill - using the manager's judgment;  this flexibility comes with a higher risk of large losses