Revolution Asset Management offers a hedged equity strategy that seeks to mirror benchmarks like the CBOE Put Index. The strategy maintains a long position in equities and carefully selected hedges, adjusting the hedge monthly. It aims to outperform the market with significantly less risk through consistent hedging. The portfolio managers have extensive experience in equities, derivatives, and risk management. They employ strategies like put writing, buy writes, and volatility spreads to generate premiums and lower portfolio risk.
2. ‣ Disclosures 3
‣ Who We Are 4
‣ RAM Portfolio Do’s and Don’ts 5
‣ Strategic Overview 6
‣ Position Strategy 7
‣ Fundamental Strategy 8
‣ Benefits of Hedging 9
‣ Key To A Positive Portfolio 10
‣ Controlling THETA Maximizes Positive ALPHA 11
‣ Common Hedged Equity Strategies 12
‣ Key Attributes: A Graphic Analysis 13
‣ Risk and Return Analysis 14/15
‣ The RAM Solution 16
‣ Management Background 17/18
‣ Term Sheet 19
‣ Investor Contact Info 20
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3. ‣ In making an investment decision, you must rely on your own examination of
the terms of the agreement, including the merits and risks involved. You and
your representatives are invited to ask questions and obtain additional
information from the manager concerning the terms and conditions of the
offering and any other relevant matters to the extent management possesses
such information or can acquire it without unreasonable effort or expense.
‣You should not construe the content of this presentation as legal, tax or
investment advice and if you enter into an agreement with Revolution Asset
Management LLC, you will be required to make a representation to that effect.
You should review the proposed investment, legal, tax and other consequences
thereof with your own professional advisors.
Past performance is not indicative of future results.
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4. Revolution Asset Management, LLC is a New Jersey based management team that specializes in
equity volatility trading for individual and institutional Separately Managed Accounts (SMA). The goal of
the firm is to yield positive absolute returns regardless of market performance. Revolution Asset
Management LLC will utilize trading technology, coupled with specialized knowledge and trading
expertise, to execute volatility-based pricing trades that exploit inefficiencies existing in the equity
options market.
Concept
Investors’ interests often times create an imbalance between the expected fair value of an equity option
and the actual trading price, thus providing an investment opportunity for those who can identify this
gap. This is the underlying strategy of equity volatility trading. It is what allows knowledgeable
volatility traders to maximize profit potential in the options market.
Trading Strategy
The portfolio manager (PM) will be prudent in maintaining both long and short positions in volatility in
order to establish a balanced portfolio. The portfolio will be hedged, except where more cost effective
options and/or specific technical conditions present opportunities to take low risk directional
positions. The PM will also use call-spreads and put-spreads to address skew positions when feasible.
The PM will make volatility spreads between similar stocks and/or indices where relative mispricing
exists. The PM will avoid situations where an absence of liquidity could cause an adverse movement in
a spread.
Risk Management
The portfolio manager (PM) will use strict Risk Management parameters in establishing, holding, and
adjusting positions. The PM will be vigilant in spreading and hedging trades at the time they are
established. Overnight risk will be addressed by the PM, adjusting positions accordingly before the end
of each trading day. The PM will avoid positions with large risk and implement self imposed stop loss
measures for each strategy. When conditions for preferred strategies are not favorable, the PM will opt
to take a more defensive stance, allocating an appropriate amount of assets to cash and/ or increasing
hedging protection over the entire portfolio.
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5. RAM DOES NOT:
◦ DOES NOT Use Computer Generated Algorithms, “No Black Box.”
◦ DOES NOT Implement Day Trading Strategies.
◦ DOES NOT Hedge Without Strict Parameters in Place.
◦ DOES NOT Allow Your Portfolio to Experience Extreme Draw Downs.
◦ DOES NOT Add Confusion to the Investing Equation.
RAM DOES:
◦ DOES Outperform in Sideways, Down, or Low Return Markets.
◦ DOES Have Strong Up Market Participation
◦ DOES Lower Portfolio Risk in Down Markets.
◦ DOES Collect Significant Cash Flows From Option Premium While Market Volatility is High.
◦ DOES Protect Investments With Per Position Hedging and Total Portfolio Hedging.
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6. Revolution Asset Management offers a hedged portfolio strategy similar to
benchmarks created and monitored by the Chicago Board Options Exchange.
Our Strategy seeks to mirror benchmarks such as the CBOE Put, and Buy-Rite
indexes by following proprietary trading protocols for maintaining a long
position, a carefully selected hedge, and for adjusting the hedge forward
each month at or near expiration.
During ongoing market cycles the portfolio consistently outperforms the
markets with significantly less risk. A true indicator of ALPHA generation.
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7. ‣Underlying Securities are owned and option strangles are deployed to obtain
maximum option premium.
‣ A 60-90 Day Time Horizon on expiration months is utilized in conjunction
with underlying Securities. Weekly adjustments are made to improve cost basis
and add additional premium.
‣ Delta hedged, with exceptions due to technical conditions that present
opportunities to obtain low risk directional positions.
‣ Use of call/put spreads to address skew positions and volatility spreads are
deployed where relative mispricing is present.
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9. Hedged portfolios have dramatically less risk.
Hedged portfolios consistently and significantly out perform unhedged
portfolios.
Option Premium creates positive cash flow, increasing total return regardless
of market direction.
Strong Positive Alpha.
Low Standard Deviation.
By implementing hedged equity strategies consistently, RAM’s goal is to
create ADDITIONAL RETURNS with LESS RISK.
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10. Theta
A measure of the rate of change in an option’s theoretical value for a one-
unit change in time to the option’s expiration date. Measures how the
theoretical value of an option ‘erodes’ or reduces with the passage of time.
Time decay is specifically quantified by theta.
Options have a finite life, they expire at a known date. At expiration, options
either have some value or are worthless.
Theta measures how the option price erodes as time advances towards
expiration.
RAM sells option hedges in return for cash flow.
The time decay of option prices, Theta, works in favor of our portfolios.
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11. Option positions demand attention both on and as monthly/weekly expirations approach.
◦ Counter-parties may exercise their option(s) early if conditions warrant.
RAM’s function is to maintain both long and short positions in ALL market conditions.
Careful monitoring of both the equity and options markets allows us to capitalize on
opportunities to take full advantage of Theta and increase cash flows:
◦ RAM adds value by optimizing the hedged portion of the portfolio:
Rolling the hedge forward at expiration
Rolling the hedge early to preempt “assignment”
Rolling the hedge early (up or down) to capture additional option premium
Adjusting the hedge bias in a down market to capture additional premium
All Theta option hedge adjustments are strictly held to an extremely disciplined, proprietary
management and trading philosophy.
The Goal of RAM’s trading and execution team is to deliver higher positive alpha through our
diligent attention to Option Premium and Theta.
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12. Buy Write- Large Cap At-the-Money: a strategy which takes a long exposure
in the S&P 500 and hedges it by selling short, near month, at-the-money call
options on the S&P 500. Benchmarked to the BXM
Buy Write- Large Cap 2% (Market Standard) Out-of-the-Money: a strategy
which takes a long exposure in the S&P 500 and hedges it by selling short,
near month, 2% (Market Standard) out-of-the-money call options on the S&P
500. Benchmarked to the BXY
Put Write – Large Cap: a strategy which sells short near month, at-the-money
put options on the S&P 500 collateralized by a cash reserve sufficient to
withstand being put, taking ownership of the S&P holding and enduring a
market collapse to zero. Benchmarked to the PUT
*Definitions as Defined by the Chicago Board Options Exchange (CBOE)
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13. All hedged portfolio performance data on the following slides are sourced
from the Chicago Board Options Exchange (CBOE). They do not include
transaction costs or management fees.
Additional Performance Analysis has been taken from Bloomberg L.P.
Topics covered by the stated sources are:
◦ Average ALPHA
◦ Average BETA
◦ Average STANDARD DEVIATION
◦ Average Annual Returns
◦ Monthly Comparative Returns
◦ Up-Market/Down-Market Capture
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14. ALPHA BETA
2.11
STANDARD DEVIATION
18.15
*Hedged Portfolio vs S&P 500
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15. Monthly Comparative Returns Over
Average Annual Returns Past 5 Years
Average Percentage Months Up/Down Over
the Previous 5 Years
*Hedged Portfolio vs S&P 500
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16. Hedged portfolio returns outperform Long/Short Equity only portfolios.
Superior Performance in all types of market conditions.
Consistently Low Standard Deviation.
Strategy maintains a Long Equity Bias and is actively managed, not day-traded.
The Active Advantage: By careful attention to market action and prices, RAM seeks to adjust the short
option hedge as expiration approaches. This allows RAM to capture additional option premium and
preempt option expiration events that can cause performance drag. All active adjustments follow a
proprietary trading protocol to ensure discipline.
A Structural Advantage: RAM implements strategies with large cap, liquid, transparent securities with
advantageous risk/return profiles.
A common sense approach to investing results in an easy to understand portfolio. No confusion or
hard to interpret computer algorithms.
Redirect risk away from the portfolio leaving volatility and speculation to the market.
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17. John Scheirer, CIO, Portfolio Manager
Mr. Scheirer has worked in the financial data sector for over 12 years as a
Derivatives/Equity Quantitative Data Specialist for Bloomberg L.P. His expertise in
understanding both Exchange and Option data types assists both the research and
execution team, as well as prospective investors. His trend analysis skills, coupled
with his market knowledge, guides strategy assessment for core positions while
minimizing risk. In addition, he brings international market experience and
contacts through his several years of living abroad in Hong Kong.
Peter Serratelli, CEO
Mr. Serratelli has over 30 years operations experience running his own firm, and
has been managing stocks for more than 20. Well versed in trading Equities and
Derivatives, Mr. Serratelli used an extremely disciplined bottom up approach,
always looking for opportunities to purchase stocks “wholesale.” His experience in
both local and global economies factors heavily in the overall firm strategy. Mr.
Serratelli is known for keeping his focus on his people, and believes a team
approach is extremely important to success.
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18. Brian Spak, Head of Trading Operations
Mr. Spak comes to the RAM Team with a Degree in Finance combined with
extensive accounting experience. Before coming to RAM, he ran his own
independent Financial Planning Practice for over 12 years, giving him an in-depth
perspective on investor concerns. Mr. Spak’s analytical background enables him to
closely monitor the portfolio while using his knowledge of the options market to
hedge underlying stocks and adjust holdings for market volatility. Mr. Spak’s
mathematical background allows the team to maximize premium return while
immunizing the portfolio.
Scott Aljian, COO
Educated at Montclair University, Scott Aljian is a corporate veteran bringing over
23 years of experience in product presentation, training, and product development
to RAM. Mr. Aljian is influential in creating, authoring, and implementing
operations manuals and protocols covering product knowledge, policies,
procedures and presentation skills. Priding himself on being closely linked to client
needs, Mr. Aljian also brings an extensive knowledge of productivity and
performance metrics to the firm.
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19. Investment Manager- Revolution Asset Management, LLC
Minimum Initial Investment- $500,000
Redemptions- 6 month lock-up period. Early redemptions subject to a 3% fee
Management Fee- 2% Management(A)/20% Performance(Q)
Auditor- Direct Access Partners
Prime Broker- Multiple, (Direct Access Partners, JP Morgan)
Performance Analysis- Bloomberg L.P.
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