INCREASE EARNINGS AND REDUCE RISK with an effective new Analysis Tool and Risk Management Technology for Natural Gas, Heating Oil, and Crude Oil.
Introduction to ADEPT
Understanding Account Structures
Sign-up for Services
ADEPT is a new and sophisticated analysis and trading system based on modern physics that provides a substantial competitive advantage for hedgers and traders.
"I've followed it. It works."
- Jim Vincent, Vice-President of Crude Oil Trading, Con-Agra
- Reduce risk on every trade through accurate money management technology.
- Identify changes in trend – both long-term and short-term – with greater accuracy.
- Increase earnings in both hedging and trading operations.
Introduction to ADEPT
What ADEPT is
ADEPT is a new and sophisticated analysis and trading system based on modern physics that precisely measures where markets are most likely to experience fluctuations in price due to the pressures exerted by existing open positions.
ADEPT provides a gauge for measuring and quantifying market behavior. Because this gauge is only available from IES, the information it provides is proprietary and provides a competitive advantage.
Who uses ADEPT
Hedgers and traders use ADEPT to reduce risk and increase earnings.
How ADEPT is used
IES offers two services to capture ADEPT's competitive advantage.
- Portfolio management– IES acts as a trading advisor through a consultancy agreement. IES places trades on behalf of the client in a non-correlated hedge account. IES receives a consultancy fee and a share of earnings. The client gets the benefit of advanced technology, excellent money management and a highly skilled staff of personnel without having to pay overhead and employee benefits.
- Information services – client receives buy and sell recommendations by e-mail and voice throughout each trading day. These recommendations are complete with all the specific money management recommendations the client needs to achieve the critical earnings-to-risk ratio. The Client pays a fixed quarterly fee for this service.
More about ADEPT
ADEPT is a completely new analysis and risk management technology, unlike any other currently in use in any market. It is not a trend following system, a pattern recognition system, nor is it based on any oscillator or known technical, quantitative or fundamental system.
ADEPT combines its new analysis technology with advanced money management techniques to provide an unparalleled competitive advantage in natural gas, heating oil and crude oil.
Successful hedging and trading often is not as dependent on understanding how long-term fundamentals affect price as it is dependent on understanding how the intermediate pressures of various derivative financial vehicles influence price in a time scale meaningful to trade entry, volatility fluctuation and trade system loss capacity.
ADEPT uses advanced concepts from modern physics to precisely identify the pressures exerted on price by the positions that are open in the market. This results in an understanding of when market participants will be most likely to decide to liquidate or transfer positions. To the best of our understanding, no other tool is capable of identifying these critical price/time junctures.
ADEPT applies a concept from modern physics known as degrees of freedom. Using a comprehensive and complex measuring system, ADEPT identifies 60 degrees of freedom sets that mark specific price points during each discrete time unit at which the various derivative vehicles traded in the market create their own pressure on price.
These price centers are important because futures markets are a zero-sum game. This means that in a very real and fundamental way, futures markets are completely driven by the accumulation of open positions and the subsequent need to liquidate these open positions over time. All open financial positions must eventually be liquidated, leaving only the very specific volume of what will actually be physically delivered left in the market.
During this process of accumulation and distribution, the various derivative vehicles that hedgers and speculators use to achieve their objectives exert pressures of different kinds on the price of the underlying commodity. Futures, for example, have linear payoff structures while put and call options have both linear and non-linear payoff structures over time as their premium values deteriorate.
Portfolio managers express their beliefs about the future of a market by using these derivative vehicles. Once these beliefs are expressed, the vehicles themselves exert pressure on future price. It is this pressure that ADEPT measures.
ADEPT accomplishes its sensitive measurements through the utilization of a set of interlocking, multi-dimensional lattice structures based on modern physics. These complex structures measure the degrees of freedom of market price. These degrees of freedom go far beyond the three dimensions commonly measured in the classical physical world. ADEPT monitors over 60 degree of freedom sets that provide very precise information about changes in the essential make-up of the market. As a result, ADEPT is capable of identifying with great precision the price points at which the market might experience a change in the behavior of buyers and sellers.
At these very specific price centers one of two things happens. Either the market becomes burdened by existing positions or its does not. If the market does become burdened by existing positions, then it behaves in one way. If it is not burdened by these positions then it behaves another. Once the behavioral pattern of the market is determined at these specific price centers, ADEPT enters a position.
Because the price centers are so specific and fundamental to the existing market in any discrete time, ADEPT is capable of profitably applying a comprehensive risk and money management system. One substantial benefit to ADEPT is that it quickly reduces the risk on an open position to zero by closing out half of a trade at profit within a specific orb of the price center. ADEPT then moves the stop-loss on the remaining position to break even. Once these initial profit objectives have been hit, then ADEPT is playing with the house's money. This substantially reduces risk in the client's portfolio.
In back testing ADEPT, as in back testing any analytic approach, the analytic team was concerned about curve-fitting data. The expectations generated by back testing were higher than normal, which both raised red flags and indicated that ADEPT might perform with above average returns in real time. When ADEPT was tracked in real time, the actual returns exactly matched the five-year historical statistics. This proved that the price centers are valid, for when combined with specific behavioral market characteristics they produce 65% profitable trades with never more than three consecutive losing trades.
ADEPT is an entirely new analytic method based on sound fundamental, albeit complex, scientific logic coupled with prudent risk management controls. It is this prudence and complexity that lead to a back-tested statistical return of 80% to100% annual net earnings with a 5% maximum draw down. This return is actually better than a 16 to 1 earnings-to-risk ration, over twice what IES suggests a client will receive by using ADEPT.
- Portfolio Management Services IES offers portfolio management services using ADEPT. Under the terms and conditions of the contract for these services, IES acts as a trading advisor through a consultancy agreement. IES places trades on behalf of the client in a non-correlated hedge account. IES receives a consultancy fee and a share of earnings. The client gets the benefit of advanced technology, excellent money management and a highly skilled staff of personnel without having to pay overhead and employee benefits.
- Consultancy Fee: 4 percent of funds under management.
- Incentive fee: 20 percent of net profit.
- Fees paid quarterly.
Information Services IES offers daily information services for hedgers and traders of natural gas. These services provide the same trading signals followed by the Portfolio Management Services, including the advanced risk management technology that controls the critical risk/ reward ratio.
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Understanding Account Structures
Accounts are always segregated in the name of the client. No money is ever given to IES, other than the fees due at the end of a quarter.
"Dollars under Management” This is the dollar figure used to calculate consultancy fees. Each client has to have at least $1 Million under management.
“Actual Funding” sometimes known as notional funding, this is the actual amount deposited by the client. This amount varies from day-to-day depending on the open positions in the account. Actual funding is usually not more than 25 percent of Dollars Under Management.
“Amount at Risk” sometimes known as the Book Loss Level, this is the amount the client is willing to risk before terminating its investment in the project. The Amount at Risk in the ADEPT program should never be more than 10 percent of Dollars Under Management.
“Expected Return” IES expects a return, based upon the statistical expectation of ADEPT, in excess of the 8 to 1 earnings-to-risk ratio. Over time, and with the increase of overall Dollars under Management, the earnings to risk ratio is expected to decrease. IES will seek to limit the amount of Dollars under Management to a level in which the client can reasonably expect a 30 percent return on Dollars under Management. The client understands that prior performance is no guarantee of future results and that IES makes no specific guarantee of return.
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