The Gargoyle Dynamic 500 seeks to produce long-term results superior to the S&P 500 with reduced risk. The strategy establishes a long position in the S&P 500 and sells Index Call Options to target a net-long market exposure of 50%. This is similar to well-known Buy-Writing strategies such as the BXM® Index but with a crucial difference that can give Gargoyle investors a significant edge.
Over full market cycles, S&P 500 Index exposure will benefit by maintaining a consistent hedge through the sale of index call options.
The Gargoyle Dynamic 500 approach is designed to maintain a proper hedge at all times. Unlike the BXM® whose market exposure may vary from 0% to 100% (as the options sold become more or less likely to be in-the-money at expiration), Gargoyle dynamically adjusts the options hedge to maintain consistent market exposure within a band of 35% to 65% net long. These adjustments can allow for greater downside protection and increased upside participation compared to a static buy-write strategy. Since inception, the Gargoyle Dynamic 500 has outperformed the BXM with less risk.
1. The annualized standard deviation of monthly returns since inception.
2. The risk -free rate of return used to calculate Sharpe and Sortino ratios is the Federal Reserve H.15 series (U.S. T-note Treasury Constant Maturity 3 Month, H15T3M Index).
Gargoyle Dynamic 500 returns are the returns of the Gargoyle Dynamic 500 Composite and are presented net of all management fees, brokerage commissions and other expenses, and include the reinvestment of dividends, interest, and other earnings. The Gargoyle Dynamic 500 Composite (the "Composite") is comprised of accounts that invest in the S&P 500 Index (the "SPX") and sell short SPX call options, targeting a combined net market exposure of 50% long. The Composite was created in August 2012. Since the Company manages its actual client portfolios according to each client's specific investment needs and circumstances, the Company cannot affirm that the returns of the shown are similar to all accounts participating in the Gargoyle Dynamic 500 strategy. This is due in part to the timing of trades by the Company, market conditions, money market balances maintained by the client, and the timing of the client's deposits and withdrawals. Therefore, prospective and current clients should not assume that similar performance results to those shown would have been achieved for their accounts had they been invested in the Strategy during this period. The Benchmark is the CBOE S&P 500 Buy-Write Index (the "BXM"). The BXM is a benchmark index that is designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index. The BXM is a passive total return index based on buying the S&P 500 Index stock portfolio and writing the near-term S&P 500 Index call option, generally on the third Friday of each month. The BXM is calculated on a total return basis with dividends reinvested and is not assessed a management fee. Valuations and returns are computed and stated in U.S. Dollars. Past performance is not indicative of future performance.
No assurance can be provided that the Gargoyle Dynamic 500 will achieve its objectives or that investors will avoid losses resulting from the options portfolio performance, which is anticipated to fluctuate inversely to equity indexes. There are certain risks associated with investing in the Gargoyle Dynamic 500, including but not limited to: less than optimal participation in market advances and less than expected protection during market declines.