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Mutual Fund News


Special to The Globe and Mail

David Hogan, 40


Chief economist and international tax specialist at financial advisory firm Richter LLP.

The portfolio

Concentrated positions in futures and options markets, including wagers on falling crude oil prices and S&P 500 index volatility.

The investor

David Hogan has been an investor since his teens. While a university student, he dabbled in biotech stocks. In 2005, the Resolute Growth Fund scored a 100-per-cent gain for him. In 2008, Mr. Hogan founded an investment club for futures traders (, which claims an average annual return of 25 per cent.

How he invests

Mr. Hogan learned to be comfortable with volatility as a result of a stint early in his career analyzing volatility in foreign exchange markets for the Bank of Canada. While he acknowledges options and futures are definitely not for everybody, they fit in nicely with his high tolerance for risk.

An example is his trade in natural gas futures this winter. Their prices were much higher than the spot (market) price. In such a situation, prices for the long-term futures tend to decline toward the spot price as they move toward their expiration dates. Mr. Hogan profited from this "roll" by selling short the long-term futures while owning the futures nearest to the spot price.

A similar trade is his short on crude oil futures. "Crude oil buyers pay a premium to have an uninterrupted supply," Mr. Hogan says. This premium shrinks as the futures roll toward the spot price and can provide a profit to the short seller as long as spot prices don't rise much.

"With the U.S. stock market on its longest winning streak since 1996 and index options at cheap prices," Mr. Hogan has bet on S&P 500 volatility with a straddle position (holding S&P 500 call and put options simultaneously). He'll profit if the index has a large swing in either direction.

Best move

Being short S&P 500 volatility (VIX) futures in June, 2012, when European bailouts caused them to plunge by nearly half.

Worse move

Being long S&P 500 futures in anticipation of a favourable resolution of the U.S. debt-ceiling issue during August, 2011, but getting blindsided by a sharp selloff in Spanish and Italian government bonds.


"The efficient market hypothesis deters people from doing what it supposes people do. So do it."

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