Trading the S&P from a 3D perspective

March 8, 2018 08:00 AM
Trader Profile

He says that he has not missed one trade from 2008 until now. “Our job is to protect people in the marketplace. 3D’s systems are built to adapt to the daily narrative of the market, which enables us to protect our investors literally one day at a time. If I decide to take the last trade of the year off and the market drops, that is a half a percent. 

3D is long, short or flat in the S&P 500 on a daily basis, and only does about 1,200 roundturns per million per year. “We are very selective with our single generation,” Dugan says. “We take pride in the fact that we can identify noise. When there are conflicting signals we are not as active.” 

Dugan acknowledges that 3D does not capture all of the upside. “I am not so much concerned with capturing the upside as I am as protecting the downside because people are already long,” Dugan says. “My job is to add value and protect your portfolio, increase your risk-adjusted return. You are already long, why do I need to capture all of the upside. You probably have more of that than you had in your entire life.”

That is why 3D believes now is the perfect time for investors to explore their programs. “The timing could not be better,” O’Donnell says. “Just because you are diversified doesn’t mean you are protected. In our view, what better market to use and protect yourself than the market you are exposed in, the S&P 500.”

“We don’t want to be labeled as doom and gloom,” Dugan says. “We understand that it is cyclical. I created a product that is going to enable the investor to participate in the upside, and to reduce their downside by 50%.” 

They view the current period as similar to the mid to late 1990s when many analysts saw the market as overbought and due for a correction, yet the bull market persisted for several years. “This is the problem we are solving,” O’Donnell says. “You want to be invested in the stock market, you don’t want to miss this historic move, but you are also vulnerable to two 50% drawdowns like we saw in 2000 and 2008.”

Dugan says 3D is the answer to that problem. “It truly is an insurance policy for your portfolio,” Dugan says. “I am not saying a crash is coming, I am just saying be prepared. And what we do is enable you to be invested and protected.”  

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About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.