Stathole Sports ETF ® Shareholder Update - We Have Hit Some Rogue Waves
Dear valued shareholders,
If there's one thing to take away from the Stathole Sports ETF ® graph above it's that we are still up since the funds inception of $495 in mid-April. But I concede, if there's two things to take away its… that it's also still beating our competition (VOO) despite their ascent in the volatile tariff landscape.
With that said. We had a turbulent couple of days that I would be remiss to not address. A couple of rogue waves that I fully intend on counterbalancing with safe asset selections to cure this portfolio of a passing cold.
So what happened?
May 5: -$25 (I bet on hockey that's on me)
While I've dabbled in some hockey derivatives getting by Scott free before, the final goal with just a couple minutes left to play crushed this otherwise brilliant position seeking just short of 25% ROI. Didn't help that the first goal of the game was within some 30 seconds. Credit to me though as I didn't chase this loss and make things worse. I stuck with just this one bet on that day. I'm sorry, position.
May 6: -$50 (the Timberwolves must have done all the drugs on their extended break)
This one made me sick. Absolutely sick. That over 188.5 was the last leg and it would still have hit if Naz Reid made that final three with seconds left despite the fact that the Timberwolves would have been asked to leave playing like this at a rural LA Fitness location. I've never seen anything like this abhorrent display. Add Steph Curry getting injured early and you can easily see why this is not my fault at all for losing. In fact - if this is what it takes to take me down, good luck having some colossal BS like this happen again (but really… bad luck! Please don't happen again!).
Of course - I do have a plan to set things straight both quickly and responsibly. People forget, when the market gets choppy, those waves bring you up just as much as they pull you down. But before we get to that I do need to uphold my fiduciary duties and relay this tiny note from a good friend of mine (an actual CFA) who has monitored this fund and brazenly taken over as head of our due diligence team. Feel free to skim or not read at all.
Due Diligence Update – STHL ETF
Rating Change: Overweight → Neutral (Probation)
Recommendation: No New Money;
Reduce Exposure
Summary:
We are formally downgrading STHL from Overweight to Neutral and placing the fund on probation while we re-underwrite the portfolio managers (PMs) and assess the robustness of current risk controls. Our concerns stem from recent extreme outcomes that have exposed material weaknesses in the fund's hedging approach and overall strategy design.
Performance Breakdown:
Over the past 48 hours, the fund has experienced two highly adverse events—characterized internally as "rogue waves"—which have effectively eroded nearly all of STHL's prior outperformance relative to a diversified benchmark of alternative yield-generating ETFs.
Left-tail risk failure: The fund failed to hedge against severe underperformance (e.g., GS/MN failing to reach 189 total points), exposing it to outsized drawdowns in positions predicated on "safe" overs.
Right-tail risk failure: Simultaneously, the fund was unhedged against improbable upside outcomes (e.g., FL/TOR producing 9+ total goals), compounding losses by mispricing the risk of volatility spikes in historically stable matchups.
These outcomes challenge the core thesis of the fund’s strategy: that predictive models can consistently exploit inefficient pricing in low-volatility sporting events for incremental return. With both tails breached in such a short span, the strategy's fundamental resilience and repeatability are now in question.
Risk and Portfolio Management Concerns:
The current structure appears to lack adequate dynamic hedging or circuit-breaker mechanisms, making it ill-equipped to respond in real time to market dislocations in betting lines or late-breaking player news. We are initiating a re-underwriting of the PM team’s process, data dependency, and risk oversight practices.
Outlook and Guidance:
Given the fund’s sharply deteriorated risk/reward profile and the heightened volatility likely to persist as markets digest recent outcomes, we are issuing the following interim guidance:
No new capital should be allocated to STHL until we complete a formal reassessment. Current holders should consider reducing exposure, particularly if sizing is based on a volatility or capital preservation mandate. We will issue an updated recommendation once our due diligence on PM discipline and risk structure is complete.
Bottom Line:
While STHL was previously viewed as a unique low-volatility alternative income strategy, recent market events have invalidated core risk assumptions. We now view the fund as tactically impaired, and exposure should be adjusted accordingly.
Blah, blah, blah. We're going hard in paint tonight to clean up last night's mess. In a couple months from now - we'll see this little dip as a blip on the green radar of tiny bars on an upward bar graph. Here's today's play. While it might be a surprising move to put a little over a third of the funds net worth on a single position, at least we're not using margin (yet).
The play:
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See you on the other side. I'll be going a very nice steakhouse for lunch to pre-celebrate our climb back up. I will not be inviting the due diligence team.
Shareholder Report Log 3 - April 24
Shareholder Report Log 2 - April 21
Shareholder Report Log 1 - April 15
