C2Star Certification Requirements - missed the boat?

C2
1

Having not looked closely at these criteria until after I started the strategy running (my own stupid fault!), I now realise that my strategy may have now missed legibility for C2Star status according to one criteria:

Maximum Equity Drawdown (5%) rolling 24 hour

Rather frustratingly, with my day trading strategy, I could have set the daily stop loss at 5% (or less) and had negligible impact on performance. Now that I have exceeded the above limit, does that mean my strategy can never qualify for C2 star? Or is there some way to re-qualify the strategy?

2

I’m afraid that I must deliver disappointing news. A strategy must apply for C2Star certification before it starts trading. C2Star status can’t be applied for after the fact.

Here’s how to start down the road of C2Star certification.

3

OK thanks. So you need to create a strategy (but don’t trade), apply for C2Star, and then start trading?

4

So you need to create a strategy (but don’t trade), apply for C2Star, and then start trading?

Correct.

5

Maybe it’s just me, but that doesn’t seem clear from the C2Star Certification Requirements page. The way I read it, it feels like you can apply post-hoc (i.e. after 60 days trading or whatever).

Thanks for the help though.

6

And what’s going on with those strategies with the half-star (i.e. “Meets requirements but not yet certified”)? How does that work?

7

Well, for example, you might see a requirement like this one:

2023-03-03_11-37-26

… but the strategy has only been trading for 55 days, not 60. So, it has not violated any of the red lines (i.e. hasn’t had a massive drawdown), but hasn’t quite become fully certified yet, either. That’s the “half-star” icon you see.

8

Ah, ok, so these traders registered their strategy from the get-go, but haven’t quite crossed the finish line yet?
Sorry for being a dumbass. It’s a friday!

9

This is exactly correct.

10

One more clarification: how does the “rolling 60 days” requirement work for the Sp500 out-performance work?

First, does it mean a strategy has a 60 day ‘countdown’, and if it isn’t beating by 1% after that, then the window for C2 Star status is closed forever?
As time goes on, does it then have to stay >1% for each and every 60 day window?

11

For every strategy participating in C2Star, we monitor the amount of time it is in a fully-certified state. So, for example, imagine that you start your strategy on day 1. You perform well. Starting on day 61, we can begin to ask: “Did the strategy beat the SP500 for the preceding 60 days?”

For as long as the strategy beats the SP500, we consider it compliant. The cumulative amount of time you are “certified” increases. Later, when it comes time to pay you money for your strategy, we run a calculation: “How many days was it fully certified?” and we pro-rate your payment based on this.

So, just to take a simple example:

Imagine suddenly on day 90, we look at your strategy and see it is not quite outperforming the S&P over the past 60 days. Nothing irrevocable happens. Your strategy is still in the C2Star program. Perhaps after 10 days or so, performance improves (or the SP500 tanks!) and now suddenly, your 60-day-lookback performance is beating the SP500 as required. Well, later, when we do the accounting and pay you for your performance, our software basically notes, “Hey, there was a 10-day period in there where the strategy wasn’t fully certified, so payment is reduced accordingly. But the strategy is still in the program.”

Now, contrast this with a violation of risk controls. Again, a simple example: On day 85, you lose $29,000. That’s it. Once you violate a loss constraint, the strategy is kicked out of the program. (You’ll still be paid for performance achieved before that date.)

In summary, there are two classes of C2Star requirements. One set are red-line risk/loss controls. Violate those, and the strategy is out of the program.

The other set are “minimum performance” stats such as “Must exceed SP500 by 1% over rolling period” – if you violate this, no sweat – you’re still in the program and can regain full certification as your performance improves again.

MK

1 Like
12

Just following on from your example above, would it then be feasible for a strategy to under-perform the market for some time (a few months say, or 120 days, which is quite feasible for many winning strategies), and then regain full C2 star status once it again outperforms the SP500 for a length of time? Or will the strategy always be pro-rated by some amount?

Similarly, could a strategy underperform during the initial 60d window… But then ultimately gain C2 status once it finally outperforms at (for example) 120 days? Would that mean that the strategy now qualifies for a pro-rated payment (i.e. 1/120th on the first day it finally achieves C2 star status, but slowly increasing with each day still reaching the milestones)?

13

Just repeating unanswered question again: Could a strategy underperform during the initial 60d window… But then ultimately gain C2 status once it finally outperforms at (for example) 120 days? Or is it “game over” if a strategy reaches day 60 without outperforming the index?

After all, it’s not unusual for very winning strategies to have windows of underperfomance. It’s the long term that matters.

14

Doesn’t that answer your question?
My understanding is that C2 Star is only over when you break the red-line risk/loss controls. If you don’t meet the other parameters, you won’t get the $1000 prorated on the days.