The Ballsy Move That Might Have Gotten David Coolidge Those Fabulous 20% Returns In August

David Coolidge’s Velite Capital Management, a commodity hedge fund, returned a stunning 20% in August while the rest of the hedge fund industry struggled to average .4% returns.

How the heck did he do it?

We asked around about his strategy. Here’s one guess at what he did. The move is pretty ballsy.

Below is a chart of 2011 natural gas.

Coolidge might have had some sort of options structure here positioning himself against natural gas, and then maybe he was long oil against it. In other words, he might have been short natural gas and long oil during the period isolated by the white bars, where there is a big drop in natural gas. Apparently this was a pretty popular trade, but Coolidge seems to have had it on in bigger size than everyone else.

Very risky – but it paid off.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.