“A smooth sea never made a skilled mariner,” goes the proverb, and we've sailed some rough waters in the relatively brief history of our calendar-spread newsletter. As Jared noted in his review of Condor Options performance for the first quarter of 2010, we've demonstrated time and again that market-neutral strategies can and do work in all kinds of markets. Nevertheless, some environments are more challenging than others, and the measure of a strategy depends as much on how it performs when the going gets tough as when the market hands us an “easy” month...
Earlier this month, we announced a change in how we're going to publicize the performance of our strategies. Much as a company's performance and the price of its stock can suffer in the long-run as a result of too much focus on short-term performance, we believe that investors do best when they take a long-term perspective...
In the August cycle we again disproved two misconceptions: 1) that a market-neutral approach can’t perform well in a trending market, and 2) that a positive-vega strategy won’t profit in an uptrend.
By combining position-level adjustments with portfolio-level risk-management, we outperformed the market in terms of our average return per trade, and booked a model-portfolio return (which is based on a cash allocation sufficient for three trades, including adjustments) that would earn most fund managers their…
Our positions for the June cycle were like Dr. Jekyll and Mr. Hyde. In general, it was another difficult month, in terms of falling implied volatility and, in the case of our IBM trade, an uptrend culminating in a whipsaw—but we still managed to break even: hitting the target profit for our SPY position made up for our IBM loss. And even though we underperformed the market for the month, we’re still outperforming handily over the long-run.
In Part I, our Performance Comparison for May showed an average return per trade of 6.40%, with a model portfolio* return of 5.13%—compared to the S&P 500's gain of 1.53%. Here are the trades that got us there:
Sunday, April 25, 2010
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