FUND STRATEGY
>
Introduction/Overview
>
MimoMat
Strategy
>
Stock Surfing
>
Examples and Illustrations
>
IPO Example
>
The
News Example
>
Objective
>
Contact Information
Introduction/Overview
The MimoMat
strategy has been specifically developed by
Dietmar Scherf for active hedge funds. Basically, this trading strategy consists
of taking advantage of micro movements in a stock within its macro
trend, and henceforth the name MimoMat
(Micro movements within Macro trends). It doesn't matter if the macro trend is upward or downward.
Within the longer term overall trend called the macro trend,
virtually all stocks, especially stocks with large trading volume
and liquidity provide so-called micro movements which usually do not change the
macro trend. There are some exceptions to the rule as e.g.
significant company related news could also change the macro trend.
MimoMat
Strategy
Micro movements within a macro trend usually take place on a daily
basis. Such micro movements may consist of an approx. 2% - 10%
range of volatility. It is intended to
garner an approx. 25% - 30% profit from this range in each transaction during
such micro
movements. This strategy allows with minimal risk a net profit/capital
gain of
approx. 0.5% - 3% of the investment capital per transaction. Often, such profits can be
captured within minutes and therefore allow for a fervent
transaction frequency within sequences of micro movements during
each day when such movements occur.
In order to take full advantage of
micro movements and to reduce risks regarding liquidity, a stock
must have a large trading volume, also so that through block trades the
stock price is neither significantly affected on the buy and the sell side.
Therefore only stocks that trade several million shares a day will
qualify for the MimoMat
strategy.
Stock Surfing
For illustration purposes and to put it into simple terms, the MimoMat
strategy is a form of stock surfing. Meaning, a wave, either upward
or downward, is identified and the investment professional takes
advantage of this wave as long as possible. Basically, the old Wall
Street saying "The Trend is your Friend" is applicable. Of course, the MimoMat
strategy is much more sophisticated as it not only identifies a
worthwhile wave or micro movement, but also provides an estimate regarding the
strength (potential %movement) of such a wave/micro movement.
Examples
and Illustrations:
On November 20, 2006 the Nasdaq-traded stock WYNN (Wynn Resorts)
opened approx. 5% lower from its previous closing price at around $89 a share,
down from approx. $94 a share. The macro trend of WYNN
had been upward for each of the 1-month, 6-month, 1-year and 3-year
periods with many micro movements within the general (macro) trend. To obtain
the highest possible accuracy and to reduce risk, we also apply further
dissections into so-called sub-macro trends. Sub-Macro Trends are
defined as shorter-term (the time frame may vary) macro trends
within a general macro trend. A sub-macro trend may either conform
to the direction of the overall macro trend, but for a short
period may also be contrary to the overall macro trend as e.g.
during correction phases.
In the case of WYNN
shares on November 20th, a purchase price of approx. $89 a share was
possible early in the session. The stock rebounded quickly to
approx. $92.50. Using our MimoMat
strategy we waited for the confirmation of the upward micro movement
― the rebound ― which was indicated by upward momentum through
increased volume on the upside. Therefore we bought the stock at $90
and within approx. 2 - 3 minutes the share price reached $91 and we
sold our position. A few minutes later, the stock reached approx.
$92.50 and then retreated again. The total upward micro movement
consisted of approx. 3.9% of which we captured approx. 1.1% of
profits within approx. 2 - 3 minutes.
Of course, in addition to this one transaction in the upward micro
movement, we could have also timed and evaluated the topping out
process of the upward micro movement at around $92.50 and then
perhaps sold a position short at around $92 to repurchase the stock
at $91 or so to generate yet another approx. 0.8% in capital gains.
There are a number of components to
identify interesting micro movements, ... most predominantly aspects regarding the
volume and block trades indicating strength in an upward or downward movement, as
well as exceptional and various news of interest regarding a
particular company.
IPO Example:
The NMX (Nymex) IPO on Nov.
17, 2006 was one of the best short-term trading opportunities
through a micro movement. It was very easy to purchase the stock at
the open at around $125 a share and within 10-15 minutes the stock
traded at around $152. Realistically, it was very easy to sell
the stock at around $145 and to generate a quick 16% profit. Of
course, in the case of an IPO, no actual macro trend had yet been
established, aside from increased revenue and profit data of the
pertaining company indicated
in the offering prospectus, and based
on the fundamentals incl. comparisons to other stocks in this
particular sector regarding market caps and so forth. Therefore, at least an
estimated or imaginary macro trend can be established. A
speculation of this nature carries a much greater risk, but then the
rewards were significantly higher than under the typical conditions
for established stocks as this transaction provided at least a 16%
capital gain within several minutes. But not every IPO is ideal to
apply the MimoMat
strategy.
The News
Example:
As an additional example in this
regard, we could e.g. look at the following stocks: GM and MGM for
November 22, 2006. As it was announced that Kirk Kerkorian's
Tracinda Corporation would purchase an additional 15 million shares
of MGM for up to $55 a share, the stock opened significantly higher
from the previous closing price of $49. Realistically a purchase
price of approx. $52.50 a share was possible early on Nov. 22, and
then shortly thereafter it was no problem to sell the stock above
$54 a share, providing a 2.8% profit. On the other hand, while
during the day on Nov. 22 it was speculated that as a result of Mr. Kerkorian's
MGM purchase announcement, he may sell some of his GM holdings,
later in the afternoon of Nov. 22 it was confirmed that Mr. Kerkorian's Tracinda Corp.
would indeed lower their GM holdings by
approx. 25% to a total of 7.4%. GM stock dropped from around $32 a share to approx.
$31 a share, which allowed a profit of approx. $1 a share or 3% within
minutes during this particular micro movement.
MimoMat Objective:
The key objective is to produce and secure maximum capital gains
through each transaction within the shortest possible time frame by
also significantly reducing the risk of potential losses in such transactions. The
purpose of the MimoMat
strategy is to produce income. Long-term asset growth over several
years for this fund model's
assets is not an objective as for reasons of efficiencies and the
trading flexibility through the use of the MimoMat
strategy the applicable capital base must be limited (currently
at approx. $250 million per fund/trader)..
Every single day there are
micro movements within many higher volume stocks and ETFs, usually in stocks
that trade at least several million shares on a daily basis. The
opportunities abound and with the MimoMat
strategy potential micro movements within certain types of stocks
can be identified (some documentation
regarding the implementation of the MimoMat
strategy is available through the following link
http://www.be24.at/blog/author/dietmar_scherf
- German only!).
 Read
Dietmar Scherf's article ""Heisser
Sommer an der Wall Street" (Hot Summer on Wall Street) in
German from August 21, 2008 at
medianet.at:
http://www.medianet.at/content15813-46.html
Contact
Information:
E-mail:
ds@scherf.com |
Cascada 
