THE THIRD
DOOR
FUND

Third Door Fund is primarily an options-driven vehicle. Equities provide directional conviction; options provide the asymmetric structure to capitalize on it. The fund targets setups where the risk-reward is structurally skewed — where a defined maximum loss unlocks a theoretically unbounded upside.

The options toolkit includes directional calls and puts on high-conviction signals, volatility plays around macro events (energy markets, geopolitical catalysts, Fed decisions), and put spreads deployed as portfolio hedges during uncertainty windows. Every options position is sized relative to the underlying signal strength and current portfolio exposure.

Recent examples include a near 10x return on SPY calls executed around ceasefire news flow in the US-Iran conflict, and a 669% return on USO calls during the energy volatility spike. These were not lucky trades — they were the product of a thesis, a model, and disciplined execution.

Position sizing is one of the most underrated edges in trading. Third Door Fund uses the Kelly Criterion as its core sizing framework — a mathematically derived formula that determines the optimal fraction of capital to deploy on each trade based on the estimated probability of success and the expected payoff ratio.

Kelly prevents the two most common portfolio killers: over-betting (which destroys capital in drawdowns) and under-betting (which leaves returns on the table). Every signal that APEX produces is accompanied by a Kelly-derived position size. The model doesn't just tell you what to trade. It tells you how much.

In practice, the fund uses a fractional Kelly approach — deploying 25–50% of the full Kelly recommendation to account for model uncertainty and real-world execution slippage. This conservative overlay ensures the portfolio survives adverse regimes while still compounding aggressively in favorable conditions.

Alpha generation means nothing if you blow up. The fund operates under a strict 15% maximum drawdown threshold — a hard stop that triggers a full portfolio review and position reduction if breached. The worst drawdown to date has been -5.0%, well within acceptable parameters.

Risk is managed at three levels. At the trade level, each position has a defined maximum loss before entry. At the portfolio level, correlation between open positions is monitored to prevent concentration in a single macro theme. At the model level, signal confidence scores gate which ideas make it to execution — low-confidence signals are filtered regardless of their surface-level attractiveness.

The fund also uses ATR-based expected move calculations to set realistic price targets and stop zones for each position. This prevents emotional decision-making in live markets. The model sets the parameters before the trade is open. Execution follows the plan.

Most quant models ignore the world. APEX Signal doesn't. The fund maintains an active geopolitical macro thesis layer that informs which sectors and instruments receive elevated signal weighting at any given time. This is not discretionary guessing — it is a structured overlay that translates macro events into tradeable hypotheses.

The US-Iran conflict is a clear example. The fund built a thesis around the Strait of Hormuz — identifying that energy supply disruption risk was being underpriced by the market. This translated into USO and UNG positions that generated outsized returns as the thesis played out. When ceasefire signals emerged, the model rotated — SPY calls captured the relief rally.

The fund actively monitors energy markets, interest rate policy, election cycles, and sector-specific catalysts as inputs to the macro layer. Geopolitical events don't replace the model. They inform it. The combination of systematic signals and macro awareness is the core differentiator.