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How It Works

How does Chartwell Fund generate incremental income?

Chartwell Fund uses the assets of our partner accounts as the maintenance requirement to sell Put and Call 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 and the maintenance requirement is adjusted accordingly.

Stocks “put” to the partnership are either held indefinitely 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 may require a margin loan with margin interest being deducted from trading income.

When a Call Option is sold the partnership receives premium income in exchange for the obligation to sell shares of stock at a certain price and within a certain time period. Call Options sold for shares that the Partnership owns are referred to as “Covered Call”. There is no downside risk to Covered Calls, the risk is the loss of future gains had the stock been held.  Chartwell Fund only sells Covered Calls.

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

If the Call Option is exercised then the Partnership sells the underlying stock at the agreed upon price and accounts for the gain or loss.

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.

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 into an increased ownership share of the partnership.

Each partner’s proportionate interest is adjusted each quarter to account for investment performance, withdrawals, and additional contributions to the Fund.

Past Performance Example

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Contact Us

Phone

(404) 304-1722

Address

307 Fazio Dr
Oxford MS 38655