Summary

The ADOY shareclass seeks to profit from short term options and futures strategies. At a high level, this return stream is meant to be a low volatility, high Sharpe product orthogonal to most any other investment in any given portfolio.

The core strategy provides liquidity in S&P 500 Index Options and capitalizes primarily on premiums. This core function entails two primary risks: directional market risk and quick gamma changes that make hedging difficult and expensive. The directional market risk is hedged in real time using underlying futures contracts. Hedging methods utilize our proprietary modeling of the volatility term structure, implementing hedges that are greater than or less than tradition delta hedging strategies. We manage the gamma risk with short term trading of futures based on shorter term patterns of momentum and mean reversion. Our goal here is to generate returns independent of the core options writing and hedging strategies. We currently trade only section 1256 contracts, which receive 60/40 tax treatment and can provide a total return benefit compared to mark-to-market funds.