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How It Works

How does Chartwell Fund generate incremental income?

Chartwell Fund uses the assets that our partners have assigned and transferred to the partnership brokerage account as the maintenance requirement to sell Put Options. When a Put Option is sold the partnership receives premium income in exchange for the obligation to buy shares of stock at a certain price and within a certain time period.

If the Put Option expires without being exercised then the obligation ends, the premium is retained as trading income, and the maintenance requirement for the trade is freed up.

If the Put Option is exercised then the partnership buys the number of shares at the agreed upon price out of partnership cash on hand or its margin account, the premium is rolled into the cost basis of the stock, and the maintenance requirement is adjusted accordingly.

Stocks “put” to the partnership are either held indefinitely as a common asset and included in the maintenance requirement for future trading OR the shares are sold at a profit or loss to exit the position. 

When the fund sells a position that has been put to us it is referred to as being “unwound.” When a position is unwound at a profit the entire trade (i.e. the sale of the Put Option + the purchase of the put stock + the sale of the position) is referred to as a “round trip.”

Think of Put Options as an insurance product that investors are buying to insure the risk that an individual stock will go down in value. Chartwell Fund, in essence, is the insurance company underwriting that risk.

 The fundamental risk for Chartwell Fund is that we might have stocks put to us that have declined precipitously in value and do not bounce back in a timely manner. Holding these shares as a common asset may require a margin loan with margin interest being deducted from trading income. If and when these shares are sold at a loss the margin loan may be paid off with other common assets or the assigned assets of partners.

Proprietary Trading Strategy

Over his years of investing, Mr. Gulley has developed a trading strategy that he deploys as the portfolio manager for Chartwell Fund. The spread between the current market price of the stock and the strike price of the Option, the target premium rate, and number of contracts sold are all proprietary information. The details of these transactions are not disclosed publicly nor to the limited partners. Limited partners are disclosed the Names that are being traded.

What is the method of partnership accounting?

Chartwell Fund uses a Cash accounting method and calendar quarters. The Fund is closed to investments and withdrawals during the quarter. New capital coming into the fund and withdrawal decisions are made and communicated to the General Partner by 5pm ET on the last business day of the calendar quarter.

Balance Sheet

Chartwell Fund accounts for 2 Asset classes: Assigned Assets and Common Assets.

Assigned Assets are shares of an Index Fund or Sector ETF owned by a Limited Partner and assigned to Chartwell Fund as the basis of their investment in the Fund. Since the shares are assigned there is no Capital Gain or Loss when transferred between the Limited Partner and the Fund.

Common Assets are any assets that are commonly owned by the partnership in the proportionate interest of the partners.  These assets typically include Cash and Marketable Securities. Limited Partners may contribute Cash to the Fund to increase their % ownership of Common Assets and Net Trading Income.

All Liabilities are Common Liabilities and shared in the proportionate interest of the partners.

Income Statement

Dividends of Assigned Assets are passed through directly to the owner of the asset at the end of each calendar quarter.

When a Put Option is exercised, and a Position is Put to us the Net Option Premium paid is taken out of Trading Income and included in the Cost Basis of the Position. Put Positions are held as a Common Asset and its market value is tracked at the end of each quarter to either be accretive or dilutive to Net Trading Income.

Audit

Chartwell Fund is subject to an annual independent audit that is sent to each partner upon completion.

Trading Formula

Trading Income is calculated using the following formula:

Net Trading Income is paid to partners according to their proportionate interest at the end of each calendar quarter. Partners have the option of taking this payment in Cash or rolling it over into Common Assets of the partnership.

Each partner’s proportionate interest is adjusted each quarter to account for investments, withdrawals, and the beginning market value of Assigned Assets

Past Performance Example

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Contact Us

Phone

(404) 304-1722

Address

307 Fazio Dr
Oxford MS 38655