Condor Options

The January expiration cycle was about as tame as they come: realized volatility continued the decline that began in early December, due in part to the holiday lull.

Performance Comparison

• S&P 500: -4.25%
• Dow Jones Industrials: -3.47%
• Russell 2000: -4.07%
• S&P 500 Covered Call Fund: 2.55%
• Condor Options VAMI: 4.03%
• Note: the period measured is from expiration to expiration, rather than from the start of the month.

To make it easier for current and prospective members to analyze and track our performance, we’ve abandoned the old format of our Performance page: the multiple model portfolios were confusing to some, and the backtested performance including our risk management tools led others to focus too much on those tools (especially the Sigma Stop indicator) at the expense of the strategy itself.

The updated 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 as well as the effects of any of the risk management tools mentioned above.

Just as importantly, we’re listing the numbers that traders should really care about:

January Iron Condor

• SPY 80/82/99/100: 32.26% return.  We only published one trade for the January cycle, as volatility declined so fast and so far across the board that we weren’t excited about any additional short vega positions.  Luckily, we did get into this trade early enough to profit from that decline in volatility.  One notable feature is that this trade was deliberately unbalanced – we brought in 0.76 in premium and only took on 0.24 of upside risk.  Had markets declined substantially, we would have been able to open additional positions to offset any directional risk, but that didn’t happen, giving us instead a nice return fairly quickly on the one trade.

January Reading

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

• Edge, Execution, Allocation: Pieces of the Trading Puzzle
• An Antihumanist New Year’s Resolution
• Beta and Risk in Troubled Markets (Part 1, Part 2)