Jeff Gundlach of Doubleline has been throwing out some big trade ideas lately – the kind he characterizes as something an ambitious young hedge fund manager looking to take a huge risk might take. Maybe we should add the term Gundlach Spread to our list of spreads. His big contrarian call last April – short Apple/long natural gas – generated a ton of attention, as has his more recent short Yen/long Nikkei trade recommendation. So how have these trades performed since his calls?

Disclaimer: past performance is not necessarily indicative of future results.

After coming dangerously close to going negative last fall, the short AAPL/long nat gas trade has been on a tear. Technically the Gundlach version of this trade included leveraging it 10x, which would make these returns (and the risk) even more eye-popping. What about the Japan currency debasement spread?

Disclaimer: past performance is not necessarily indicative of future results.

So far, the newest Gundlach spread is on a similar trajectory as his famous call from last year (11.24% vs 11.12% for the AAPL/NG trade at the same point after the call. Disclaimer: past performance is not necessarily indicative of future results.)

While the Apple stock side of his first call makes it the stock trading territory of hedge funds, the Yen/Nikkei spread is something easily accomplished via the Yen and Nikkei futures markets, thus bringing it into the purview of managed futures. Indeed, several managers we follow are enjoying the opposite trends in both – Yen down, Nikkei up.  This highlights an interesting component of multi-market systematic programs which don’t trade spreads, per se.  Even though they don’t trade spreads and consider spread data – they create spreads in the course of their normal trading by riding one trend in one market and another opposite trend in another market.  And when we talk about controlling risk by market diversificaiton, this is what we’re talking about – creating “spreads” of sorts with different positions in different markets.

Now, this spread isn’t the same thing as being short corn/long wheat or similar, which in theory could provide some protection from a large directional move in the entire grain complex. And Gundlach’s “spreads” aren’t really ways to remove directional risk and play relative pricing differences; they’re really just big calls on two markets simultaneously. But the fact that managed futures are “following” one of Gundlach’s latest calls shows there’s more than one way to skin a cat,  and following trends in each market to create a spread can work just as well as making the big call.