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

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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