7328 Dillman DriveHudson, OH 44236

p. LoneWolfAsymmetric@gmail.com

Table of Contents

I. Executive Summary2

Reactions are the Norm

Mission Statement

Keys to Success

II. Investment Management Process 4

Back Tested Trade Signals

Modified What If Analysis

Optimized Option Strategy

III. Option Investment Programs 6

Leveraged Macro

Current Market Forces

Option Writing

Volatility Trading - internal use only

Global Macro - internal use only

Global Currency - internal use only

IV. Marketing 7

Institutional Market

"Dead" Money

Women Investors

V. Conclusion - Final Thoughts 9

Philosophy

Disaster Insurance

Proactive versus Reactive

Executive Summary

Lone Wolf Asymmetric is an absolute return manager and is in business to

grow capital at an above rate of return through the use of options, leverage,

market timing and prudent risk controls.

It's through the use of options that we are able to have strong hands and

weather whatever storms that may occur in the bond, currency, commodity

and equity markets. While others may refrain from certain markets, it's our

ability to design strategies that tap into the unique characteristics of options

that allows us to feel safe and confident in extremely volatile markets.

Despite whatever chaos that’s thrown our way it's the use of options in our

investment management process that allows us to keep risk low, allows for

higher leverage and limits our losses while staying liquid.

Reactions are the Norm in all types of Markets

SPX & US Ten Year Bond courtesy of Bloomberg

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Reactions are the Norm in all types of Markets

Ford & the Euro courtesy of Bloomberg

Mission Statement

We think the investment industry has been relying on outdated investing

ideas far too long and a change is needed. For those searching for a change

we want to be their first alternative. We are looking to engage investors who

understand the benefits of an "asymmetric" philosophy and who want to

invest alongside of us for the long haul.

Keys to Success

The key to success is the blending of our discretionary analysis of global

macro-economic and geo-political events with our back-tested technical

system's signals. The results of this combination are then expressed through

optimized option strategies that provide us with the best opportunities from

a risk/reward perspective. This strategy is applied to several global markets

and asset classes for diversification purposes. But the overriding factor is our

strong risk management approach to loss control that is our key to success.

Our ability to keep losses contained to predetermined amounts while letting

our winners “run” allows us to compound our returns faster over time than

other investment managers.

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Investment Management Process

The heart of Lone Wolf Asymmetric is its ability to use options in its

investment management process. Through the use of options, leverage,

market timing and prudent risk controls we can create portfolios with

asymmetric returns. Asymmetric portfolios can produce unlimited gains

while limiting losses to a predetermined level.

It is our firm belief that a strong risk management approach to loss control

will win out over the long haul even if we don't produce the highest returns

in a particular year. The ability to not lose large sums but instead to keep

using our “edge” to build upon our winners helps us to compound growth

faster than other managers over time. Ultimately, the way the asymmetric

process works is that we'll eventually side-step some very large systemic

losses or we'll leverage some very large winners that will put us as the top

investment returns list.

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Investment Management Process

Lone Wolf Asymmetric has developed a conservative system that trades both

the long and short sides of a market. The technical signals that form the

basis of our trading system have been back tested over a forty year span

and over a variety of markets and economic environments. While the system

generates a specific buy or sell signal it also includes a number of trade

signal parameters (i.e. number of winners / losers, average holding time,

average profit /loss, max profit /loss etc.). These parameters are later used in

the option optimization process.

The second part of the Lone Wolf Asymmetric process starts when we plug in

all the current option inputs into the appropriate pricing model. The model

then generates the current prices and Greeks for all of our option strategies

(outrights, spreads, in-the-money, at-the-money and out-of-the money

options and various ratio combinations). This sets the baseline for the option

costs from which comparisons and optimization will be based.

We then do a "modified what if" scenario. This is done by plugging in those

particular individual trade signal parameters such as "the average holding

time for a winner" and "the average profit" and re-calculating the option

strategies results. In this way we are able to ascertain the option strategy

which best optimizes the trade signal's parameters given the current market

conditions and pricing.

Optimization maximizes expected results by matching that trade signal with

the appropriate option strategy. However, in the event that we are wrong –

wrong direction, taking too much time, volatility dropping more than forecast

- we are able to make adjustments to either eliminate or reduce our risks

with follow-up tactics or strategies. The risk management of our option

portfolios is crucial to the overall success of the program.

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Option Investment Programs

Lone Wolf provides several investment programs that can fit a variety of

client objectives and risk appetites. It currently has three main investment

programs with several others awaiting approval.

The "Leveraged Macro" portfolio. This portfolio of options tries to achieve

large outsized returns by combining short and intermediate trading system

signals with an option to leverage a longer term macro view(s). As usual the

trading system generates the signals/ trades. The system's back-tested

signal's parameters are then fed into our option optimization program.

Holding period for these positions can range from one month to one year.

The "Current Market Forces" option program tries to achieve steady

above average returns through more option diversification while maintaining

less leverage. Similar to the above portfolio only less levered. Also, no macro

view is expressed through the options. Instead this program reflects current

market forces. Typical holding period for these trades is between one month

and three months.

An "Option Writing" program that tries to capture steady returns through

time decay. This includes naked and covered option writing strategies. This

program is run separately unto itself. However, a portion of the option

writing / covered option program is included in the above first two programs

to manage Greek risks.

A Volatility trading program for internal purposes only

A Global Macro-economic overlay program for internal purposes only

A Currency overlay program for internal purposes only

At a certain level, investors want to understand what we're doing - they want

some transparency to the process. We aim to provide as much transparency

as possible but not 100% of the whole process. For our investors we want

them to remain confident in us and what we do for them. But from a

competitive perspective we cannot reveal all. From what we see nowadays

too many people try and copy your original alpha ideas. Eventually if enough

folks copy them then it turns into some common beta product. We believe

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we have merged some unique skills - option trading, global macro-

economics, portfolio allocation, computer programming, risk management

and technical analysis into a thoughtful system that few can replicate if at

all. Therefore, we believe that the investors are truly getting what they pay

for when they commit to us and we commit to them.

Marketing to Women, Institutions, & "Dead" Money

We believe we are appropriate for a variety of investors. The spectrum

includes private high-net worth individual investors, wealthy family offices,

pension funds, foundations and endowment funds. Basically we think we are

appropriate for anyone who has underperforming assets and wants to re-

energize some life into their portfolio while still keeping risk / losses under

control. By avoiding major draw-downs that occur to "buy & hold" managers

we can compound our gains at a higher rate of return than our competitors.

Lone Wolf Asymmetric believes that your money should be working hard for

you at all times and in the most efficient manner as possible. Money invested

in various non-performing "long-term" opportunities is "dead" money. Dead

or sleeping money is unproductive and a waste. It may have gotten that way

for a variety of reasons (i.e. investment attitude is too risk averse or the

investment is taking too long to manifest itself while other viable alternatives

are missed.) In any case, we can be the diversifying manager that re-

energizes an individual or institution’s portfolio.

No one needs "dead" money. There was a time when the Bass family fortune

was languishing under such circumstances. Investment manager Richard

Rainwater was brought in by the Bass family to re-energize the

fortune. He did it by leveraging the capital and taking risks. To

replicate a similar feat you'll need to leverage yourself and take on more

risk. But most investors don't have the stomach for such risk taking.

Nevertheless, we can prudently replicate it nowadays through options.

Additionally, the options will allow us to control more assets at a fraction of

the cost thereby spreading the risk around. Again, the risk/reward profile is

asymmetric (with unlimited gains / limited losses) and can be done when the

situation lines up in our favor.

Since, our investment time horizon is shorter, we can leverage the positions

under current known conditions. We can time our entrances and exits in a

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more efficient manner. The investment horizon that we focus on is current

and better understood by us because the investment horizon has scheduled

releases that we can plan for with only a small amount of unaccounted

random variables.

But for those managers looking down the road three to five years their world

is a total mystery with an infinite number of unknown and unaccountable

variables. How can these investment managers with time horizons three to

five years down the road with some even saying they have twenty year

horizons predict what things will be like? In this age of technology change

happens a lot quicker. Therefore, in our minds taking a position today based

on a time horizon three to five years down the road is irresponsible and a

breach of fiduciary responsibility for those managing investor funds.

Investing Women - Longer Lives & Less Money than Males

One market that we believe has great potential for us is the market tailored

towards women investors. It is a market that hasn’t been adequately served

but it’s especially suited to us. We see a couple of factors converging that

will influence their investment choices. Therefore, we want to market

ourselves as a financially appropriate investment that caters to their long-

term financial needs and conservative investment concerns

Traditionally women are more conservative in their investments than their

male counterparts. Generally, they want to understand what they are getting

into before they invest. Statistically, more women are graduating from

universities than men and not only with degrees but advanced degrees. Yet

they will be earning 20% to 30% less.

Nevertheless, women have to reflect these current biases into their

investment choices. Women need to add to their calculations that they have

been living longer and have been earning 20%-30% less than their male

counterparts. Thus they will need to step up their investing habits if they

want to live comfortably in their retirement years. While our program of

using options keeps risk low and limits losses it also allows for greater

returns by using leverage. Knowing that their long-term investment goals

are being met should allow them to sleep soundly.

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Conclusion - Final Thoughts

Philosophy

Let's talk a little about distributions and probabilities. In a normal

distribution, 95% of events occur within 2 standard deviations, while 99.7%

of events will be contained within 3 standard deviations. Most people build

their portfolios around this concept. However, when you delve into high

frequency financial data you'll see that markets have a tendency go way

beyond those 3 standard deviations and more frequently than ever

estimated by statistics.

On page 5 we show the S&P 500 Index from back in 1987. It's a graph of

daily returns showing 5,10 & 20+ standard deviations within a period of

three days. I can't tell you how terrifying this was. I worked with a few guys

back then who were really big time traders and who would regularly take

down large portions of bond auctions and were very familiar with managing

substantial risks. But during those days they were calling their wives and

telling them to go the banks "right now" and take everything out. They were

that terrified that the financial system was on the verge of a total collapse. A

5 standard deviation move would theoretically occur every 9,500 years or so,

while a 20+ standard deviation move would be expected to occur every

355,120 billion years. So just try and imagine what those three days in row of

improbable events felt like. I can say you won't be able to come even close

to those feelings unless you were there and were interacting with the folks

during those days. The tension and the fraying of nerves was reaching

everyone as long delays on trade reports had people guessing where they

stood position wise.

It was in this type of environment that I became a total convert to options.

Even if your positions were wrong the massive spike in volatility drove prices

on both puts and calls higher enabling you to get out with some profit even

on totally wrong directional positions.

Disaster Insurance

Getting back to asymmetrical portfolios you may find other hedge funds that

try and duplicate an asymmetrical payoff - it sometimes is called hedging

tail-risk. But they haven't thought the whole process through. We have seen

a number of equity managers just buy deep out-of-the-money put options

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and then pray that a major market correction doesn't occur. But they forget

that buying out-of-the-money options is a low probability bet and can be

costly if done over a long period of time or the adverse move doesn't quite

reach their strike protection.

There is another group that doesn't own the underlying but they do buy a

variety of out-of-the-money options hoping to profit from disaster in a variety

of markets. Again if you use the delta as an approximation of the trade

coming to fruition most of the time it will incur losses before a winner occurs.

In this type of investment process you take numerous losses before getting

your winner. And even then you hope your gain will offset your previous

losses.

Proactive versus Reactive

But to do asymmetric investing properly you really need to think about doing

it from a proactive rather than a reactive perspective. You want to design

your strategy and investment around the current environment that you

know, the environment that you anticipate and understand what you can and

can't control to your benefit. You need to think about the properties of

options, option theory, probabilities, leverage, money management,

directional trading and trade timing. In addition, you need to have back-

tested trading strategies that can be applied via the options. Once you have

that you can start to proactively design asymmetric portfolios. In the end

you still need to play great defense /loss control so that you deliver above

average returns. You don't need to swing for the fences and have 300% to

500% returns to show that asymmetric trading is the way to go you just need

to outperform others by controlling your downside risk.

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