## Dave, How do you calculate the total return on Aspen’s Alpha Trades?

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Good morning Dave,

For the Alpha Trades, you report the YTD total return. For calculating this (or for the actual trading) what were/are the allocation guidelines for the trades?

Brian E. – Abbotsford British Columbia – Canada

Thanks for the question Brian.

For the Alpha Trades, we calculate the total return based on the assumption that 5% of the overall portfolio is dedicated to each trade. Futures trades assume that one contract is used per trade. The following example will illustrate the calculation.

**Portfolio Size:** $100,000

20% of portfolio dedicated to Alpha Trades: $20,000

25% of $20,000 is allotted to each Alpha Trade: 25% x $20,000 [the $20,000 will fluctuate as trades return gains/losses]

Let’s say that we go long $5,000 of IWM and it returns +4.9%

the gain is $245 and so our Alpha Trade capital is now worth $20,245.

We take a futures trade that profits $750

Alpha Trade capital is now worth $20,995.

The next Alpha Trade will employ 25% of $20,995, or $5248.75

We take an options trade that returns +71%

Alpha Trade capital is now worth ($5248.75 x .71 + 20995) = $24,721.61

After the last trade the total return on the Alpha Trade capital is **+23.6%**

Hope that helps,

Dave

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