Ascendant has four related trading programs that involve the writing of options on exchange traded futures contracts. As discussed below, the programs differ in their use of leverage, the degree to which the selected options are "out-of-the-money," the risk management techniques employed and the fees incurred by the clients. Although the programs have a similar objective of generating income through the writing of options, the differences between them are designed to moderate the risk and return characteristics of the primary options writing strategy to accommodate different levels of risk tolerance.

 

Ascendant's investment objective is to generate an above average return on Client capital in all market conditions while reducing overall risk exposure to underlying financial market movements. Currently, Ascendant manages four trading programs that write covered and uncovered options on select classes of futures contracts traded on domestic and foreign exchanges. Strategic¹ Options Program, Strategic² Options Program and the JLDeVore Elite Trading Program (the "JLDeVore Program") are available to most prospective clients. Generally, Strategic² and the JLDeVore Program are more suitable for those investors who seek a more aggressive investment program; and Strategic¹ is more suitable for those investors who prefer a lower degree of investment risk. Strategicº Options Program is traded similarly to Strategic¹; but it is currently open exclusively to accounts of "related persons" (family members and relatives of the principals).

 

There are three fundamental differences between the trading programs: First, Ascendantemploys a different degree of leverage within each program. The JLDeVore Program and Strategic² seek greater leverage and use more available margin than Strategic¹ or Strategicº. Utilizing a greater percentage of available margin may result in either enhanced gains or losses. If the markets move in a favorable direction, the use of greater leverage increases the potential rate of return. However, if the markets move in an unfavorable direction, a highly leveraged account may experience greater losses than an account using less leverage would. Also, a highly leveraged account is more vulnerable to potential losses as a result of a margin call than one utilizing less leverage.

 

Second, the selection of options, strike prices and expiration dates differ among the trading programs. Generally, each of the programs writes options on futures contracts that are "out of the money" that Ascendant believes will expire worthless if held until maturity and, thus, generate income in the account. (Ascendant may elect to close out short positions by buying them back prior to expiration.) Options that are further out of the money are less risky and consequently yield a lower premium than options that are closer to or "at the money."

 

Ascendant may write options with strike prices that are closer to being "in the money" in the JLDeVore Program and Strategic² than in Strategic¹ or Strategicº. Options that are closer to being in the money will yield a higher premium, thereby generating more income in a Client's account. However, such options will also incur a higher degree of risk that they will be exercised by the option holder at a loss to the Client if the financial markets move against the position. Third, the JLDeVore Program will use a different fee structure than the other Strategic options programs. There will be no management fee for the JLDeVore Program; rather, Clients will receive a preferred rate of return of 1% per month on their investments and thereafter will be charged a 50% performance fee on a monthly basis. More detail with respect to the fee structure is provided under "Fees and Expenses" at pages 9-11.