Third Rail Strategy (TRS)

Third Rail Strategy (TRS) is a long/short equity strategy that seeks capital appreciation and capital preservation with less volatility than the broader equity market and “black swan” protection by following a disciplined and systematic investment process.

The returns generated by the strategy are derived from three distinct elements; returns from directional market movements, returns from option premium or income, and returns from the hedge component that creates constant downside protection.

A Complement to Your Existing Equity Allocation

 

 

Expectations
  • Designed to produce low to high teens returns.

 

Expectations
  • Losses should be less severe than unhedged strategies. Steep losses should be reduced or eliminated.

 

Expectations
  • Can produce positive returns on account of systematic rolling nature which takes advantage of changing market conditions.
Portfolio Construction
Return Drivers
Directional
  • Market Exposure
  • Deep in the Money Call/SPY Position

 

Income
  • Option Premium Collection
  • Short Call
  • Short Put

 

Enhancement
  • Mitigate Losses
  • Reduce Volatility
  • Long Put
Role of PRS in Portfolio Construction
  • Serve as a core or complementary investment for investors with a moderately positive performance outlook and low tolerance for unexpected and material market declines.
  • Generate market-like returns, with reduced volatility, while protecting against a major market downturn.
  • Provide greater liquidity with full holding transparency, no lock-up period and low fees relative to hedge funds and other alternative investments.
  • Achieve better balance of overall risk and return.
Risk Control Elements

Hedged Downside

  • Downside protection and option premium collection always in place.

Time Series Diversification

  • Investment Diversified across Monthly Maturities.
  • Eliminates “Whipsaw Effect” in Choppy Markets.

No Credit or Counter Party Risk

  • Every security is listed and traded publicly.

No Leverage

  • No borrowing.

Liquidity and Transparency

  • All investments are exchange-traded and are priced daily.
  • All investments have daily liquidity.

 

Past performance is not a guarantee of future results. This commentary has been prepared for informational purposes only. Nothing contained herein should be construed as (I) an offer to sell or a solicitation of an offer to buy any security or (II) a recommendation as to the advisability of investing in, purchasing or selling any security or pursuing a particular investment strategy. Opinions and estimates are as of the date of publication and are subject to change without notice. Forward-looking statements are based on current views and assumptions and may involve market risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The material contained herein has been prepared from sources believed to be reliable but we make no guarantee as to its accuracy or completeness. Investors should consider their individual circumstances, investment goals and risk tolerance prior to making investment decisions.

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