Hi CEO,
Here's a summary:

Main differences

Isonomy buys only long ETFs.
* Leverage is less than 1 (i.e. always holds some cash) so can be traded in a non-margin account.
* There are no explicit "insurance" mechanisms.
* Dividends and interest on cash (when there is any!) are important components.
* All trades are adjustments to existing positions so it will probably never show any closed trades on C2 as C2 only reports fully closed positions.
* It trades very infrequently, on average maybe 4 trades a year.
* Is very simple.
* The aim is low volatility with a reasonable long term return (rough target 8-10% compound per annum) by rebalancing according to a simple formula.
* Roughly speaking, about 90% mechanical.

Isonomy Plus buys long ETFs and also buys and sells a few options.
* Leveraged about 1.5 times so holds no cash and needs a margin account. However, due to how positions are constructed with the help of options, actual borrowing on margin is more like zero to 0.1 rather than 0.5.
* Some explicit "insurance" is in place.
* Dividends are important.
* All stock trades are adjustments to existing positions so will probably never show up as closed trades on C2. Option trades do show up.
* On average about 15 trades a year.
* Still pretty simple.
* The aim is to perform in a similar way to Isonomy but with higher return (rough target 15% per annum) without significantly higher volatility.
* Roughly speaking, about 70% mechanical.

Isonomy Turbo trades only options on ETFs.
* Leverage is up to about 2.5 to 5 times. No money is borrowed on margin (in fact, there is a lot of cash sitting in the account to guarantee potential obligations) as leverage results from the way options are priced.
* A lot of explicit "insurance" is in use.
* Dividends are not received; there is interest on cash... when rates are higher than now!
* Positions are opened and closed so they appear in C2 but they are used to construct long term, ongoing, "virtual positions" that are never closed, only adjusted.
* On average 35 trades trades per year, although in volatile times there are more.
* Pretty complicated. Not obvious what's going on without extensive analysis.
* Aims to return significantly more than the other two but (unavoidably) with higher volatility. Rough target is at least 25% per annum.
* Roughly speaking, about 10% mechanical although discretionary decisions are made according to fuzzy rules guided by a lot of continuous analysis.

Trader types
Here are my guesses at some trader traits/preferences that may be suited to each strategy.

Isonomy
* Not interested in trading per se, just wants to invest their money and leave it to cook. In it for the long term; years.
* Wants something relatively low risk.
* Wants something simple requiring very little involvement. Wants annual progress check to be sufficient diligence.
* Cannot or will not short or use leverage.

Isonomy Plus
* Wants Isonomy with a bit more umph but not too much extra risk.
* Understanding basically what's going on is still important.
* Is not afraid of a bit of extra short term volatility, is also in it for the long term.
* Is allowed to use options and has a margin account.
* Wants some, but not too much, involvement. Bi-annual progress checks suffice.

Isonomy Turbo
* Wants higher returns, and therefore is able to tolerate higher short term drawdowns.
* Is comfortable with more leverage, but...
* ...also wants hedging against market crashes; i.e. sudden account wipe-out highly unlikely.
* Likes the basis of Isonomy and Isonomy Plus but wants more "action" and less correlation to underlying markets.
* Is not too bothered if (s)he doesn't quite understand how the strategy works. Is happy to trust me to do so!
* Likes to track progress weekly/monthly/quarterly.


Actually, base Isonomy is probably more suited to YoutualFunds than to the active traders on C2. But I started it before I knew about YoutualFunds and it rounds off the series nicely.

Regards,
Dean.

Hi Dean,

I'm a new subscriber to Isonomy.
You say" interest on cash (when there is any!) are important components." for Isonomy.

My broker gives me 0% interest on USD cash. How will my performance differ ?

Kind regards
Magnus

Hi Magnus,
C2 doesn't credit cash interest anyway the system stats are already without that. you will notice though that Isonomy on C2 holds some ETFs that invest in cash alternatives. These should pay a minuscule dividend at the moment, but again C2 has not been registering them so if anything a real account will look slightly better.

You can also buy the cash alternatives as Isonomy does or you can skip those positions and leave cash in your account. If you do the latter then you could ask your broker to put that cash into a money market sweep which should give you a bit more than zero.

Isonomy is intended as a long term system so even though there is not much cash interest at the moment, that will change as interest rates rise again some time in the future.

Regards,
Dean.

Thanks Dean.

Regards
Magnus