From time to time when people in the equity markets are panic or pessimistic about certain market risks, volatility shoots up temporarily. However, many of those short term risk drivers do not change the fundamental picture of the underlying S&P 500 earnings or US economy in the long run. When volatility increases, derivatives market premium gets richer than fair value, thus an irrational misprice exists. Therefore, we take advantage of such rich premium by selling volatilities as arbitrage opportunities are present before they expire or are bought back.

We always long US markets most of the time and bet positively on the US economy in the long run. In the light of history since 1896 when Dow Jones was formed till the Great Financial Crisis in 2008, the Pandemic, and the Post-COVID Inflation, optimism pays off and profits from pessimism. The fuel for such optimism has always been The Industrial and Technological Revolutions throughout history. Our research firmly indicated from 2013 that such revolutions drive the current secular bull market.

Learned from pioneering companies in pharma and biotech, we have implemented an event driven strategy that capitalizes on major financial, academic and break-through clinical events. We use derivatives instruments such as options and/or futures to express our view to bet on such events. This strategy applies to any of our underlying equities such as those in high-tech sector, but particularly in biotech sector where clinical trial results are one of the major events.

philipzhang@lunacapitals.com
jianlinsong@lunacapitals.com