ART Defensive Strategy
Lower-volatility implementation of the ART framework combining short-term futures and dynamically hedged options premium.
Designed for allocators prioritizing smoother return delivery and tighter risk control within the ART framework.
Strategy Overview
The strategy integrates two distinct return drivers designed to perform across different market environments:
- Short-Term Futures: systematic trading across liquid futures markets
- Options Premium: dynamically hedged option-selling framework
The goal is to access differentiated sources of alpha while maintaining a more controlled overall risk profile. One component is intended to benefit when markets are moving, while the other is intended to perform more effectively when markets are stable or range-bound.
By combining both components, the strategy is designed to reduce dependence on a single market regime and support a steadier return profile over time.
Strategy Snapshot
Structure
Separately Managed Account (SMA)
Investor Type
U.S. Qualified Eligible Persons (QEPs)
Target Volatility
Illustrated at 12% annualized (client selectable)
Implementation
Short-term futures + dynamically hedged options premium
Minimum Account Size
$1 million at 16% target volatility
How the Strategy Works
Short-Term Futures Component
The futures component seeks to capture directional price movement across liquid futures markets using a short-duration, systematic trading approach. The strategy is supported by proprietary research focused on short-term trends and execution-driven insights across global futures markets.
This component is intended to perform best during periods of movement, dislocation, or heightened volatility, when short-term momentum and behavioral dynamics can become more pronounced.
Options Premium Component
The options component seeks to capture option risk premium through a dynamically hedged option-selling framework. It is based on the observation that options can remain structurally overpriced as market participants tend to overestimate future risk.
This component is generally intended to perform more effectively in stable or range-bound environments, helping balance the return profile when directional markets are less favorable.
Why Defensive
The Defensive version was developed to provide a lower-volatility and more tightly risk-managed implementation of the ART framework.
It is designed to operate with tighter controls than the broader ART Strategy, offering a more conservative profile while maintaining exposure to the same underlying return drivers.
This structure may be appropriate for investors seeking a more controlled alternatives allocation within a managed futures framework.
Risk Management
Risk controls are embedded at the strategy level, with a focus on limiting drawdowns and stabilizing return variability across market regimes.
Options Risk Controls
- dynamic delta hedging to manage directional exposure
- long gamma overlays to protect against sharp market moves
- long vega overlays to mitigate volatility expansion risk
Portfolio Construction
- volatility-scaled positioning across both components
- integration of directional and non-directional return streams to reduce reliance on a single market environment
Exposure is actively managed during volatility shocks, sharp reversals, and dislocated market conditions.
Strategy Characteristics
Structure
Available as a Separately Managed Account for U.S. Qualified Eligible Persons (QEPs)
Target Volatility
Illustrated at 12% annualized, with client-selectable targets generally ranging from 5% to 45%
Minimum Size
$1 million minimum for an SMA at 16% target volatility
FCM Flexibility
Clients may select their preferred FCM
Performance Snapshot
The ART Defensive Strategy is based on live returns from a fund account sub-advised by Advanced Alpha Advisers, adjusted using the ratio of target volatilities. The tear sheet also states that there are currently no live accounts running this strategy.
Return Since Inception (annualized)
15.9%
Volatility
11.0%
Sharpe Ratio
1.29
Sortino Ratio
2.04
Win Months
74.1%
Average Winning Month
2.8%
Average Losing Month
-3.1%
Max Drawdown Depth
-7.1%
HYPOTHETICAL PERFORMANCE DISCLOSURE
Important Performance Disclosure
The ART Defensive Strategy performance shown herein is hypothetical. The results are derived from a live ART fund account sub-advised by Advanced Alpha Advisers, LLC and adjusted based on the ratio of target volatilities. There are currently no live accounts running this strategy. Hypothetical performance has inherent limitations and is not indicative of future results.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. There can be no guarantee that any investor will recover invested capital. This material is intended solely for U.S. Qualified Eligible Persons (QEPs).
Additional Materials
The ART Defensive Strategy tear sheet, including detailed methodology and performance data, is available through Investor Access.
(Available to qualified investors.)