Smart Leverage is a rules-based overlay used in several DMS strategies that selectively deploys leveraged ETFs during market recovery windows — when the odds are in your favor of capturing additional gains on the upside without large downside risk. It is not the same as being permanently leveraged. The base strategy operates unleveraged; leverage is an occasional, conditional event triggered by a market drawdown.
The trigger rule
Smart Leverage watches the month-end drawdown of IWB (the iShares Russell 1000 ETF) from its most recent monthly closing high. When that drawdown reaches 10% or greater, the trigger fires. After the trigger point, when the strategy goes back into Risk On, it does so with leverage.
Note that Calculated Risk 229 is a fund of strategies and includes Triad 135 and Global Navigator 300.
Note that Calculated Risk 288 is a portfolio that includes Global Navigator 300.
The drawdown is measured from month-end close to month-end close, intraday swings do not trigger Smart Leverage. It can accumulate across multiple months of declining markets — it is not a single-month measure.
The exit rule
The leveraged position is held for up to one year, or until the strategy's dual momentum signal says to exit equities, whichever comes first. Holding for up to 12 months serves a secondary purpose for taxable accounts: gains that would otherwise be short-term can become long-term if held long enough. When the leveraged position closes, the strategy returns to its unleveraged default.
How often does it trigger?
Smart Leverage triggers infrequently and selectively. The goal is not to be leveraged most of the time, but to concentrate leverage in high-conviction recovery setups — periods where a meaningful market pullback has already occurred and momentum signals a return to equities.
Historical track record
The historical results have been compelling. For Global Navigator, only one of its Smart Leverage periods produced a worse outcome than staying unleveraged would have.
What Smart Leverage is not
Smart Leverage is not a guarantee. Leverage amplifies both gains and losses — if the market continues to fall after the trigger fires and Risk On directs the allocation, the impact is magnified compared to holding the unleveraged fund. The historical win rate is high, but no rule works every time. Anyone using a leveraged strategy variant should be comfortable with the possibility of outsized drawdowns during the periods when leverage is active. Strategies using Smart Leverage do not have higher drawdowns than the versions without Smart Leverage, but that may not always be the case.
Which strategies use Smart Leverage?
Any Strategy with a three digit number after it is a strategy that uses Smart Leverage, that number indicates the maximum leverage for the strategy. Triad 135 means that 135% is the maximum leverage, for Calculated Risk 229, 229% leverage is the maximum leverage position. If you pull up a strategy on the Strategy View page, you can see the maximum and average leverage positions by strategy - this is located at the bottom of the ALLOCATIONS & CONTRIBUTIONS section.
Treasury Duration Limiter, TDL. This is a protective overlay built into several DMS strategies which restricts the Risk Off holding to short-duration treasuries when long-duration treasuries would have otherwise been allocation.
Why it exists
Many DMS strategies will hold long duration treasuries as their Risk Off asset (some go into CAOS.) Historically, when equities fall, investors flee to long-duration treasuries, which drives their prices up and helps cushion market drawdowns. This relationship held reliably for decades. But it is not guaranteed. In early 2022, rising interest rates caused long-duration treasuries to fall at the same time as equities — one of the worst-ever years for long-duration treasury returns on record. Strategies that rotated defensively into long-term treasuries in that environment found that the expected safe harbor was also under water.
TDL was developed in response to that new reality. The goal: if long-duration treasuries look likely to be hazardous, steer into short-duration treasuries instead and avoid the compounding of a bad equity period with bad treasury performance.
How the signal works
TDL uses a momentum-based signal on long-duration treasuries themselves. It applies a weighted lookback to the returns of long-duration treasuries, using a front-weighted formula that prioritizes more recent price behavior and will keep the Risk Off allocation in shorter duration treasuries if it looks to be the better option.
What TDL does not do
TDL is only active when a strategy is already in its risk-off, defensive position. It has no effect on equity allocations and does not determine when to enter or exit equities — that remains the exclusive domain of the strategy's momentum rules. TDL is purely a safety layer within the treasury sleeve.