Zenith
Management Information
Ed Padon is the President of Zenith Resources, Inc. Mr. Padon is directly responsible for all trading and money management decisions made by Zenith Resources, Inc. (“Zenith Resources”). Performance of accounts managed by Mr. Padon can be found on page 10 of the disclosure document.
Mr. Padon attended Southwestern Adventist University and graduated in 1982 with a BBA degree in Accounting. Prior to entering the trading and management business, Mr. Padon was president of a construction and development company. The company built and developed both residential and commercial properties. Mr. Padon was involved in the estimating, financing and construction supervision of the projects. During this time Mr. Padon accumulated and managed a number of rental properties as well as three retail related businesses. Mr. Padon was active in the community and was elected a councilman for the city of Keene, Texas. In 1982 Mr. Padon was chosen as a member of Outstanding Young Men of America. In 1990 Mr. Padon divested himself from his former positions and holdings, in order to commit himself full time to the markets.
Mr. Padon started in the commodity business in 1990 by trading his own accounts. Technical indicators and bar charts were studied and utilized for trading decisions. In December of 1995 he became an “Associated Person” with Complete Price Management and started opening and trading accounts for others. In August of 1998 he opened a branch office of Emery Commodities, which was named Zenith Resources. On January 21, 2000, Zenith Resources became an Introducing Broker (IB) of Peregrine Financial Group. On December 31, 2003 Zenith Resources moved its IB affiliation to Vision LP. Mr. Padon is currently an Associated Person and the President of Zenith Resources.
Mr. Padon has done extensive research in the development of proprietary formulas, for use in the trading of options on stock index futures. After testing and legitimizing the formulas for use in the S&P 500 futures options, the system has been utilized to manage account(s) for three plus years. Zenith Resources registered on July 14, 2003 as a Commodity Trading Advisor, so that the system can be introduced to and utilized by a larger number of Clients.
Zenith Resources, Inc. (Zenith Resources) and its President may trade commodity interests for their own accounts; the records of such trading and any written policies relating to such trading, will not be made available to Clients for inspection.
Program Descriptions
Uncovered Option Strategy
The objective of this strategy is to achieve substantial capital appreciation through the speculative trading of options on futures contracts. This objective can entail a comparatively high level of risk. Zenith Resources currently engages in this strategy of selling or “writing” put and call options on stock index futures in the Index Option Program and V-Program. However in the Diversified Option Program, Zenith Resources may trade a broader portfolio of options and futures contracts including agricultural, energies, metals, currencies and financial instruments. Each of Zenith Resources clients in the Index Option Program and V-Program will receive advance notice, before having their account traded in any other type of commodity interests other than the stock index futures and options. Zenith Resources may trade commodity future and option contracts on any United States exchange.
Zenith Resources uses a systematic approach to trading, in that it relies heavily on a program of selling or “writing” out of the money options. Zenith Resources may also, from time to time; purchase options to reduce risk exposure (see Credit Spread Strategy). The implementation of the program each month depends on two proprietary formulas. They determine the strike prices and maturity periods of the initial option positions, which are written for each month’s expiration. Considerations are also given to technical and fundamental conditions in order to give the best risk/reward possible in Zenith Resources opinion. Option contracts are written at a sufficient distance out of the money to allow, in most cases, for the options to expire worthless.
Credit Spread Strategy
An alternative option writing strategy is the credit spread, which involves selling an option (see uncovered option strategy) but also includes purchasing another less expensive option. When writing a credit spread the writer is “credited” the difference between the premiums collected from writing the option, less the cost of the option purchased. Unlike writing uncovered options, where the potential for unlimited loss exists, option credit spread risk is absolutely limited to the difference between the strike prices of the options written and purchased, plus commissions and fees. Any loss would be further reduced by the amount of the credit received. While the option credit spread clearly offers the advantage of limited risk, the writer must sacrifice some of their potential profit in exchange for acquiring a limit to the risk. Zenith Resources seldom initiates a credit spread, but instead uses the credit spread strategy to reduce risk and margin on uncovered option positions.
S&P Call Credit Spreads
An S&P futures credit spread involves selling an option at a greater premium than the cost of the option that is purchased, thereby creating a credit to the trader writing the spread. A call credit spread consists of writing a call and buying another call, which has a higher strike price and therefore is cheaper than the one written. If a call spread is not closed prior to expiration, then upon expiration, the strategy will be profitable if the underlying S&P 500 futures price is below the strike price of the call that was sold. If the S&P 500 futures price rises above the strike price of he written call at expiration, the strategy may produce a loss. Thus, the profitability of a trading strategy that focuses on credit spreads on the S&P 500 futures contract depends upon the underlying price movement of the S&P 500 futures contract. In credit spreads, the loss is limited to the amount of the difference between the strike prices of the two options in the spread. For example, if a call with a strike price of 800 is written and a call with a strike price of 825 is purchased, the maximum loss on the spread is 25 points, minus the original credit of the spread. If the spread was originally put on for a credit of 5 points, the maximum profit generated, assuming the spread expires worthless, would be 5 X $250 (cash value of each full point in an S&P option contract) = $1,250. On the other hand, the maximum possible loss is 25 X $250 = $6,250 minus the original $1,250 credit, or $5,000, plus commissions and fees. Please see note below.
S&P Put Credit Spreads
A put spread on the S&P 500 future involves writing a put and buying another put which has a lower strike price and is therefore cheaper than the one sold. If the spread is not closed out prior to expiration, the strategy will be profitable if the S&P 500 futures price is above the strike price of the put written when the spread expires. If the futures price of the index is below the strike price of the put when the put that was written expires, the strategy may produce a loss. The loss will be limited to the amount of the difference between the strike prices of the two options in the spread. For example, if a put with a strike price of 750 is written and a put with a price of 725 is purchased, the maximum loss on the spread is 25 points, minus the original credit on the spread. If this spread were originally put on for a credit of 5 points, the maximum possible loss is 25 X $250 = $6,250 minus the original $1,250 credit, or $5,000 plus commissions and fees. The maximum profit potential would be calculated the same as described in the previous paragraph.
Both the call and put examples given above are hypothetical and for illustration purposes only. The actual difference between strike prices actually used by Zenith Resources may be greater or less than the ones in the example. Please see note below.
Please note: Options and option credit spreads can be liquidated before expiration with either a profit or loss, based on market movement. Zenith Resources utilizes a stop loss price, whereby a short or written option is rolled to the next month or liquidated at the time it becomes in the money. It is Zenith Resources opinion that in most instances of loss, the credit spreads will be closed out by the stop loss price, at a loss substantially less than the maximum spread loss described above.
The descriptions above are primarily from the manager’s disclosure document.
Required Documents ( in PDF Format )
Zenith Disclosure Document
THE RISK OF LOSS IN TRADING FUTURES, OPTIONS AND FOREX CAN BE SUBSTANTIAL. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. PLEASE READ THE CTA'S RISK DISCLOSURE DOCUMENT CAREFULLY BEFORE INVESTING MONEY.
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