CTA Volatility Targeting
Scale the whole book (or each market) so forecast σ hits a target — the reason a 15% vol CTA is not ‘more leveraged crude’ in a quiet month.
Definition
Estimate σ (EWMA, realized, implied). Position = target_vol / σ × signal. When vol doubles, size halves. This is how a diversified CTA keeps a stable risk budget. It also cuts size into a crisis — which can cap crisis alpha if done too fast.
Why it matters
Without it, one energy contract eats the book. With it, you may be smallest when trends are largest (2020 March).
Case
Vol doubles, target is fixed, crude trend is the year’s gift — and you own half the contracts. The target is a choice, not a law.
How to read it
Target level, estimator, and whether they loosen the target in a clean trend. 10% vs 18% vol is a different product for the LP.