The iron condor newsletter returned about 4.3% in the first quarter this year, slightly beating the 4.2% return for the VTY benchmark. The newsletter did not outperform the S&P 500 on either an absolute or a risk-adjusted basis, which, based on the prior history of this strategy, says a bit more about the market than it does about us. In the review for Q4 2009, I mentioned the most common misconception about iron condors, namely that they are only suitable during…
In absolute terms, equity implied volatility is as low here as it’s been for ages. A naive reaction to a decline in implied volatility is to take a long volatility view by buying straddles, strangles, etc. on the expectation that implied volatility will revert to a higher long-term mean. But that’s an easy way to go broke as the market continues to drift, especially since implied volatility has carried a hefty premium to short-term realized volatility for many months now.…
The iron condor newsletter returned over 18% in the final quarter this year, versus 3% for the benchmark and market index, and also managed to outperform both the market and our benchmark for 2009. Just as importantly, our maximum drawdown (9%) and standard deviation (5.6%) were nearly identical to those of the market as a whole (9%, 5.7%), indicating that we also outperformed on a risk-adjusted basis.
There is a common misconception that an iron condor options spread is only suitable during…
One of the most popular posts I’ve written is “The Bucking Gamma Bull,” in which I said:
Think of your deltas as a mechanical bull, and your gammas as the rate and intensity at which the bull throws you around. The ride starts off quietly, but as time goes on the bull gets increasingly difficult to ride, and eventually you’re likely to be thrown. That’s exactly what happens during an expiration week in which the underlying makes an unexpected move: option…
The unrelenting August rally put some pressure on the call side of our iron condor positions. However, we were able to close out the month with flat-to-positive performance for the newsletter trades due in part to our ability to stagger trade entries based on volatility and delta exposure and to size positions on a risk-adjusted basis – both techniques that we teach on the members area of the site. We are nearing the end of the September expiration cycle and…
Wednesday, April 14, 2010
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