Carrier 240 Strategy Overview
| CAGR | 19.0% |
|---|---|
| Maximum drawdown | -24.6% |
| MAR ratio | 0.77 |
| History | 29 years (357 months) |
Carrier 240 is Carrier with 3x leverage applied to its growth positions during the recovery phase of a U.S. equity drawdown, and only then. U.S. large cap (IWB) becomes a 3x S&P 500 ETF (UPRO), and the Nasdaq 100 (QQQ) becomes a 3x Nasdaq 100 ETF (TQQQ). Every other rule is identical to the base strategy: the same credit-spread signal, the same Risk On / Risk Off test, the same unleveraged defensive ladder, the same rebalancing.
It uses exactly the same Smart Leverage decisions as Carrier 170, deploying and exiting in the same months. The only difference is the size of the bet while deployed.
What the 240 means
| Holding | Weight | Unleveraged | During a deployment | Notional |
|---|---|---|---|---|
| U.S. large cap | 50% | IWB | UPRO (3x) | 150% |
| Nasdaq 100 | 20% | QQQ | TQQQ (3x) | 60% |
| Managed futures | 15% | DBMF | DBMF | 15% |
| Long/short equity | 15% | CLSE | CLSE | 15% |
| Total | 100% | 240% |
Notional exposure is 100% when leverage is dormant and 240% when it is deployed, which over the backtest was about 28% of months. The managed futures and long/short positions are never leveraged.
During a deployment, 70% of the portfolio's capital sits in 3x funds. Those two positions carry 210% of equity exposure between them, so a 10% one-day drop in U.S. stocks would take roughly 21% off the portfolio before anything else is counted.
How Smart Leverage decides
The module is identical to Carrier 170's. Only the funds differ.
Dormant. Nothing happens. Carrier 240 holds exactly what Carrier holds.
Armed. U.S. large cap has closed a month 10% or more below its highest prior month-end close. Arming and deploying cannot happen in the same month.
Deployed. Leverage deploys in the first month where U.S. large cap's momentum has turned back up and Carrier is Risk On. Smart Leverage sits downstream of the credit-spread test and cannot override it, so a 3x position is never held into a credit crisis the base strategy has already exited.
The three exits
- Momentum turns. T-bills catch up to or pass U.S. large cap on the weighted-average measure.
- Any Risk Off month. The credit signal takes Carrier out of equities, and the leveraged positions go with it.
- The 13-month cap. No deployment runs longer than 13 consecutive months.
The cap matters more at 3x. A leveraged fund tracks a daily multiple of its index, so its return over a longer period depends on the path the index took, not only where it ended. Choppy, high-volatility markets erode a 3x position faster than a 2x one, and the effect compounds with time held. Capping every deployment at 13 months bounds that exposure. The figure is 13 rather than 12 so that a full-length deployment clears the one-year holding period for long-term capital gains.
One trigger, one deployment
When a deployment ends, for any reason, the drawdown that armed it is spent. Only a fresh 10% drawdown can arm it again. At 3x, that restraint is the difference between an overlay and a liability.
The defensive side stays unleveraged
This is where Carrier 240 deliberately differs from LT Gain 300.
LT Gain 300 holds TMF, a 3x long Treasury fund, in the first month of a defensive run. Carrier 240 does not. Like the base strategy and Carrier 170, it holds unleveraged intermediate Treasuries (IEF) in every month of a defensive run.
The choice was tested directly. Using TMF in the first defensive month would have added about 0.7% a year of return, but it would have deepened Carrier 240's maximum drawdown by about five points. Nearly all of that came from a single month, March 2002, when TMF lost 11.7% in the middle of the 2000 to 2002 bear market.
The same test later retired extended-duration Treasuries (EDV), which an earlier version of Carrier held in the first defensive month. Once EDV's pre-2007 history was rebuilt from the Federal Reserve's zero-coupon Treasury curve, EDV showed the same pattern: about 0.7% a year of extra return for about five points of extra drawdown, again mostly from March 2002, when EDV fell 8%. Both trades add too much risk for the return, so Carrier 240 keeps its defensive side plain.
The practical result is simpler to hold. Carrier 240's leverage only ever applies to the growth side, only during a confirmed recovery, and only while the credit signal says Risk On.
Deployments in the record
January 1997 through September 2026, Carrier 240 deployed leverage 15 times, the same 15 as Carrier 170. The wins and the losses are both larger.
| Deployment | Months | How it ended | Carrier | Carrier 170 | Carrier 240 |
|---|---|---|---|---|---|
| Dec 1998 - Jul 1999 | 8 | Momentum turned | +22.4% | +35.1% | +46.8% |
| Apr 2003 - Apr 2004 | 13 | Cap | +33.5% | +59.7% | +92.2% |
| May 2009 - Feb 2010 | 10 | Risk Off | +23.7% | +46.4% | +72.7% |
| Oct 2010 - Jul 2011 | 10 | Momentum turned | +15.5% | +25.9% | +37.1% |
| Jun 2020 - Jun 2021 | 13 | Cap | +40.0% | +77.1% | +123.1% |
| Dec 2023 - Dec 2024 | 13 | Cap | +28.3% | +46.2% | +63.1% |
| Nine shorter deployments | 1 to 9 each | Mixed | Mixed | Mixed | Six losses (-6% to -18%), three gains (+4% to +13%) |
Figures are hypothetical returns over each deployment period, net of trading friction. The worst single short deployment was May 2010, when Carrier 240 lost 17.9% in one month against 6.7% for the base strategy.
The 240 column is not simply 1.5 times the 170 column. Only 70% of the portfolio is leveraged, and daily-rebalanced funds compound differently depending on the path the market takes. A steady recovery like 2020 to 2021 works in their favor. A choppy one works against them, which is what the short deployments mostly were.
What 3x costs
January 1997 through September 2026, net of trading friction:
| CAGR | Max Drawdown | Ulcer Index | UPI | |
|---|---|---|---|---|
| Carrier | +13.8% | -16.1% | 4.69 | 2.48 |
| Carrier 170 | +16.4% | -19.9% | 5.98 | 2.38 |
| Carrier 240 | +19.0% | -24.6% | 7.87 | 2.14 |
| S&P 500 | +9.9% | -51.0% | 15.11 | 0.51 |
The Ulcer Index measures how deep and how long drawdowns were, not just the single worst one: lower is better. UPI (Ulcer Performance Index) is return above T-bills per unit of Ulcer Index: higher is better.
Read the UPI column, not the CAGR column.
The first step of leverage, to 170, costs little on a risk-adjusted basis: UPI slips from 2.48 to 2.38. The second step, to 240, buys another 2.5 points a year and pays for it with nearly five more points of maximum drawdown and a markedly higher Ulcer Index, and UPI falls to 2.14. That is the pattern to expect: each additional unit of leverage costs more than the one before it.
Against LT Gain 300 over the same period, Carrier 240 earned less (19.0% against 21.1%), which is expected because LT Gain 300 can reach 300% notional against Carrier 240's 240%. In exchange, Carrier 240's maximum drawdown was about six and a half points shallower (-24.6% against -31.2%) and its Ulcer Index was lower (7.87 against 8.67). Their UPIs were nearly the same (2.14 against 2.18).
Taxes and holding periods
About 81% of Carrier 240's realized gains in the backtest were long-term. The three deployments that ran the full 13 months cleared the one-year holding period and produced the largest gains. Deployments that ended early on a momentum turn or a Risk Off month were sold short-term, and at 3x those short-term results, good or bad, are larger.
Where it can hurt
- Short deployments. Six of the nine shorter deployments lost money, the worst -18.1% in a single month.
- 2022. The credit signal never reached 6.5% that year, so Carrier stayed invested through the decline. Leverage was off during most of it, because momentum was negative, but it deployed in December 2022 into a further drop. Carrier 240 lost 21.8% in 2022 against 14.1% for the base strategy.
- The 2000 to 2002 bear market. Leverage deployed for one month in April 2002, just before Carrier went Risk Off, and Carrier 240 lost 16.2% that month. That was the final and largest leg of the strategy's deepest drawdown, -24.6% from October 2001 to April 2002.
- Leveraged fund decay. UPRO and TQQQ track three times the daily return of their index. In choppy, volatile markets they can lose value even when the index ends roughly flat.
Who it is for
Carrier 240 suits an investor who already holds and understands base Carrier, is comfortable with 70% of the portfolio sitting in 3x funds for months at a time during recoveries, has a long horizon, and has thought concretely about their own behavior in a 25% drawdown rather than assuming they will be fine.
It is a poor fit if you would not hold base Carrier on its own merits, if you have not held a leveraged position through a drawdown before, or if you are drawn to the headline return without having read the UPI column beside it.
Carrier 170 makes the same decisions at 2x, keeps almost all of the base strategy's return per unit of drawdown, and for most investors who want leverage on Carrier is the better starting point.
The base strategy in brief
Carrier reads the high yield credit spread each month end. It goes fully Risk Off, into Treasuries, when the spread is at or above 6.5% and has not yet fallen two points from its six-month high. Otherwise it holds U.S. large cap 50%, Nasdaq 100 20%, managed futures 15% and long/short equity 15%, rebalanced each January or when a holding drifts ten points from target.
The full rules, and how Carrier compares to LT Gain, are on the Carrier strategy page.
Past performance, including backtested results, is not indicative of future results. Backtested performance is hypothetical, does not reflect actual trading, and benefits from hindsight in the selection of strategy rules. Portions of the long-term history rely on reconstructed proxy data for funds that did not exist for the full period, including DBMF, CLSE, UPRO and TQQQ. Leveraged ETFs carry risks beyond those of their unleveraged counterparts, including the effect of daily rebalancing on returns over holding periods longer than one day. A 3x fund can lose value over an extended holding period even when its underlying index is flat. Investors should carefully consider their risk tolerance and consult with a financial advisor.
For the latest details, visit www.DualMomentumSystems.com