The KeystoneAI Strategy
Granite's KeystoneAI Strategy is an advanced investment product intended for sophisticated investors who seek returns greater than those expected from more traditional investment products.
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This strategy is executed through the Keystone Advantage Hedge Fund, providing investors with direct access to its benefits.
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The foundation of the strategy is based on the teachings and techniques found within the Trading Dominion community, established by Ron Bertino. www.tradingdominion.com
The objective of the KeystoneAI Strategy is to sell out-of-the-money put option spreads and/or combination positions on equity indexes, such as the S&P 500, and capitalize on the time decay of the value of the options sold in order to produce reasonably consistent monthly returns.
The strategy leverages the use of portfolio margin to implement income trades that are very resilient against strong down moves in the market, yet still produce a very attractive return on capital (for a more detailed explanation about portfolio margin, please click here).
Complementary hedge positions are continuously established and adjusted to protect against severe downside events.
Unused cash in the account may also be allocated to equity, bond, or Treasury positions.
The KeystoneAI Strategy is highly active, with positions monitored and traded throughout the trading day (and beyond if necessary). Risk management is central, with sophisticated modeling and scenario analysis guiding continuous adjustments and decision-making.
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A More In Depth View
The KeystoneAI Strategy combines several proprietary techniques developed within the Trading Dominion community, each designed to take advantage of different parts of the options chain/skew curve.
Most positions are structured as Put Broken Wing Butterflies, initiated 90–250 days to expiration, with added long puts on the lower leg for tail-risk protection and “Black Swan” hedging.
Positions are entered with flat delta and positive theta but only after strict entry conditions are met, including filters for price, skew, concavity, and option Greeks.
To further guard against extreme downside risk, three hedging overlays are integrated: Granite’s LP Factory (ongoing), and Granite’s LPTA and PBRTA strategies (activated by technical triggers).
Monitoring & Adjustments
Once initiated, positions are tracked through a comprehensive monitoring system. Key metrics include delta, margin ratios, theta-to-margin ratios, Vega exposure, tail risk, and margin utilization, along with the effects of volatility, skew slope, and concavity shifts.
Any deviation from guidelines prompts immediate adjustments to keep positions stable and efficient.
Typical adjustments include Put Credit Spreads, Put Debit Spreads, delta hedges with the underlying, or rolling positions up or down.
New positions are opened opportunistically on a daily basis, creating a layered portfolio of trades at different stages in their lifecycle (30–75 days). This “Campaign Trading” approach spreads risk across many positions, with seasoned trades helping offset exposure from newer ones—similar to dollar-cost averaging, but applied to options risk.
Proactive Black Swan hedging is built in through additional long puts, while a structured downside adjustment program (using Long Puts, Put Debit Spreads, and Put Back Ratios) alongside strict stop-loss rules provides further protection.
Performance Targets
Our annual performance target for the KeystoneAI Strategy is 20% (net of fees).
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It should also be noted that due to the nature of options in general, the performance of the system can and will be volatile at times, so it is crucial that all investors have the ability and tolerance to withstand this volatility. Historical back testing has shown the potential for 20%+ drawdowns on rare occasions, and 10%+ drawdowns on more frequent occasions. This level of volatility must be well understood and acceptable for any investor who chooses to engage in this program.
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For additional information as well as live, up-to-date, real-life Keystone performance results, please see our
Performance Info Page or Contact Us.
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