Self-promoted world beater Jacob Wohl, the teenage “hedge fund trader” dubbed “The Wohl of Wall Street” and profiled by many outlets – including Fox Business Network, KLTA, AOL, Tasty Trades, and others – has transitioned from his previous value, stock picking approach to formally offer a managed futures strategy. This is a significant strategy drift for the fund manager who previously professed his idolatry for Warren Buffet, perhaps the antithesis of managed futures.
Wohl takes on new look, dispenses with previous value-based strategy, moves to Hollywood Hills and adds actress to roster
Wohl has moved from his parents “Inland Empire” house in the suburbs of Los Angeles to the Hollywood Hills and along with this upgrade, Wohl has taken to an entirely different strategy than the value investing methodology: managed futures.
Wohl and his newly minted Nex Capital Management, officially registered with the National Futures Association as a CTA just this past February 19, said the firm is now engaged in a volatility arbitrage strategy that he says uses a superior pricing method to that of professional liquidity providers.
Jacob Wohl claims he can price options better than current liquidity providers
“Our strategy is based on pricing options more effectively than current liquidity providers,” he told ValueWalk as he outlined a strategy primarily based on selling and buying options on futures contracts. Wohl likes managed futures due to asset class liquidity and efficiency, particularly the 1256 tax benefits with provides investors benefits over trading in equities.
While many a fund manager have come and gone claiming to outwit professional market makers such as Virtu Financial and Citadel, Wohl weighs in on an active argument among options traders who believe the pricing models don’t accurately reflect risk. “Historical pricing data is not broad enough,” the 18 year-old fund manager said.
Jacob Wohl is at times selling volatility “naked,” which is an LTCM-like strategy
While Jacob’s web site was short on strategy details, the strategy attempts to exploit option pricing efficiency by selling and buying options “naked” – meaning that there is no spread backstop should a market move significantly against the position.
When an option is sold by itself the position is exposed to unlimited loss potential. Typically this “option selling” strategy can generate a consistent positive track record with a high win percentage but is negatively exposed during significant market moves. Wohl claims to remain delta and gamma neutral, but when markets and volatility rapidly rise such goals are often times illusive in reality.
Jacob claims to have taken the MS GARCH Volatility Projection model and created his own version, the NX GARCH model upon which the volatility trading method is based. Wohl executes the strategy in major regulated derivatives markets such as crude oil, agricultural commodity, and equity index markets.
Jacob follows the path other major hedge fund players have taken by engaging in short volatility trading, such as was the case with Long Term Capital Management, which recently opened a new fund.
Caveat emptor
