Condor Options

The purpose of the strategy we follow in our iron condor newsletter is to collect the volatility risk premium when it exists.  To accomplish this, it is important to limit our directional exposure.  Effectively hedging directional exposure kept us from taking losses in the April cycle, a period in which market neutral strategies could have been expected to suffer.

Performance Comparison

• S&P 500: 13.15%
• Dow Jones Industrials: 11.72%
• Russell 2000: 19.81%
• S&P 500 Covered Call Fund: 17.12%
• Condor Options VAMI: 0.67%
• Note: the period measured is from expiration to expiration.

Our Performance page compares the value-added monthly indexes of the Condor Options newsletter, the Credit Suisse/Tremont Equity Market Neutral Hedge Fund Index, and the S&P 500.  It includes slippage (the prices displayed in the trade list spreadsheet are the actual prices at which the participating autotrading brokers were filled), but excludes any other transaction costs.

April Iron Condors

• As we explained in Options, Timing, and Risk Management, one feature that distinguishes our approach is that we trade multiple iron condor positions in each expiration cycle, which allows us to respond to price swings by hedging directional exposure without locking in losses or giving up gains prematurely. Sometimes, options are fairly priced. In those situations, strange as it may sound, we don’t want this strategy to be profitable: that would signal that something other than the volatility risk premium was driving our gains.
• IWM 30/32/41/43: -11.14% return.
• SPY 67/69/88/90: 3.13% return.
• SPY 76/78/89/91: 8.69% return.

April Reading

Here are some posts from the past month that are worth checking out if you didn’t catch them the first time around:

• Holding Options to Expiration
• Options, Timing, and Risk Management
• Managing Greeks, Not Trades
• The Volatility Risk Premium in Index Options