Title: Unveiling the Strategies of Top Traders in 2009: A Deep Dive into Emil van Essen's Approach

Unraveling the Success Story of a Commodity Trader

In the ever-evolving world of finance, understanding the strategies employed by top traders can offer valuable insights. Today, we delve into the success story of Emil van Essen, who has achieved remarkable results in the commodity markets.

Emil van Essen's journey began in 2007 when he launched a program to capitalize on opportunities presented by the exponential growth of commodity index funds. His strategy, which has yielded a return of 218% since its inception, earned him an impressive 28.88% in 2009, propelling his assets under management above $100 million.

Front-Running the Front-Runners: A Novel Approach

Van Essen's program was designed to exploit the behavior of commodity index funds and their participants. He noticed that long-only commodity index funds roll their positions, creating an opportunity for traders to front-run these rolls. However, van Essen's strategy is more complex than merely placing bear spreads in front of Goldman rolls.

His team modeled every aspect of commodity spreads and discovered multiple ways to profit from anomalies in the relationship. Van Essen found that spreads are more consistent and easier to navigate than individual commodities, allowing him to capture alpha in this market.

Avoiding Risks: Deleveraging and Risk Overlay

One criticism of bear spread strategies is their potential for significant drawdowns during commodity shortages. In October 2006, a wheat shortage in Australia caused a spike in the front month wheat contract, leading to substantial losses for bear spreaders. To mitigate this risk, van Essen deleveraged his program from its original format and added an additional risk overlay that takes small offsetting futures positions in case of sharp rallies.

Constant Research: Adapting to Changing Markets

As index funds alter their strategies to reduce the impact of contango markets and front-running bear spreaders, van Essen remains unfazed. He believes these changes will only make his strategies more effective, as he has spent years researching how spreads work.

A Look at Other Top Traders in 2009

While Emil van Essen's strategy is a standout example, there are other traders who made waves in 2009. Daniel P. Collins, for instance, achieved impressive results by focusing on managed futures and options strategies. His approach emphasized risk management and adaptability, as he continuously monitored market conditions to optimize his positions.

The Takeaway: Embracing Novel Strategies

The success stories of traders like Emil van Essen demonstrate the importance of innovative strategies in today's dynamic markets. By understanding the underlying mechanics and adapting to changing market conditions, investors can position themselves for long-term success.