Commodity Trading Advisor Cta

commodity trading advisor (CTA) is an individual or firm that provides individualized advice regarding the buying and selling of futures contracts, options on futures, or certain foreign exchange contracts.
Commodity trading advisors must have a Commodity Trading Advisor (CTA) registration, as mandated by the National Futures Association, the self-regulatory organization for the industry.
A CTA acts much like a financial advisor, except that the CTA designation is specific to providing advice related to commodities trading.
CTAs are:

  • Regulated by the:

    • SEC regulates equity and bond-related securities

    • CFTC exchange-traded futures and options products as well as foreign exchange

  • Registered through the CFTC and members of the National Futures Association (NFA).

Obtaining the CTA registration requires the applicant to pass certain proficiency requirements.
Commodity Trading Advisors (CTAs) are professional investment managers, similar to portfolio managers in mutual funds, who seek to profit from movements in the global financial, commodity, and currency markets by investing in exchange-traded futures and options and OTC forward contracts.
Generally, both principals of a firm are asked for CTA Registration. Additionally, all the employees dealing with taking orders from, or giving advice to, the public also required for CTA Registration.
CTA requires registration to give advice regarding all forms of commodity investments, including futures contracts, forwards, options, and swaps.
Commodities investment uses significant leverage and requires a higher level of expertise to trade properly while avoiding the potential for large losses.
Back in 1970s, regulations for commodity trading advisors started when it became easy for retail investors to access commodity market investment.
Generally, a CTA fund is a hedge fund that uses futures contracts to achieve its investment objective.
There are many trading strategies used by CTA funds to achieve the objectives of their investment including systematic trading and trend following.
However, good fund managers actively manage investments, using discretionary strategies, such as fundamental analysis, in conjunction with the systematic trading and trend following.

How do CTAs Differ?

CTAs use a proprietary trading system or discretionary method generally manage their clients’ assets that may involve going long or short in futures contracts in areas such as metals (gold, silver), grains (soybeans, corn, wheat), equity indexes (S&P futures, Dow futures, Nasdaq 100 futures), soft commodities (cotton, cocoa, coffee, sugar) as well as foreign currency and U.S government bond futures.
There are a variety of trading methodologies used to identify trading opportunities and implement risk management strategies.
After years of trading and testing methodologies, CTAs maintain a disciplined trading niche through either a systematic or discretionary approach.

  • Technical vs. Fundamental

  • Systematic vs. Discretionary

  • Trading Styles

    • Trend Following

    • Counter Trend

    • Arbitrage

    • Option Writing or Selling

    • Global Macro/Fundamental Focus

  • Short-Term, Intermediate-Term, and Long-Term

  • Emerging vs. Developed Markets

CTAs vs. Hedge Funds

A CTA trades futures and currencies while a hedge fund can trade securities to a large extent.
Also, while investing in a hedge fund will include the entire actual investment in the hedge fund, for CTA, the investor will have to deposit the required cash only for margin.
The CTA is an “advisor” not a “fund”.
CTAs are basically managed-futures strategies (because trading commodity futures is way easier and less costly than trading actual commodities), and managed futures are generally established as a hedge fund structure because that allows higher fees to the owners off of a lower capital base than something like a mutual fund.
In a technical point of view, managed futures are wider as compared to CTAs, because managed futures can include futures on financial products such as equities, equity indexes, and fixed income products, which are not technically commodities.
However, some traditional CTAs have effectively morphed into managed futures because the ability to trade financial futures improves diversification and can increase returns
For historical reasons, though, these firms may still be known as CTAs.



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