Condor Options

December Monthly Review

The most interesting feature of December 2008 was the rate at which volatility - both historical and implied - declined.  While we could view this decline as simply the counterpart to the volatility explosion we saw in the fall, the changes were still very interesting to watch.  A rapidly falling volatility environment was ideal for the December expiration positions we published, though it also presented some challenges for the iron condor strategy we follow in our newsletter: specifically, we have…

Employment Outlook Disappoints. . .uh, Cheers Market

With uncanny contrarian timing, the Washington Post heralded the year-end rally in its Saturday edition with the headline, “No Santa Claus Rally for Wall St.” To be fair, the credit for this epitaphic declaration goes to the headline writer; the article itself was specifically about the market’s failure to rally last week, and the story writer was entirely innocent of any ill-considered prediction about the week to come. Nevertheless, the market reversed on cue, bouncing off the prior week’s lows Monday…

Edge, Execution, Allocation: Pieces of the Trading Puzzle

We spend a fair amount of time on this blog looking for trading systems that have some discernible and consistent edge over the market averages.  And edge is important: if you don’t know where your profits will come from, you certainly shouldn’t expect to have any.  But an empirically demonstrable edge is just one of the three components that comprise any good trading system.  The other two, execution and allocation, are also essential to the success of any trading program or…

Premature VIX Obituary Roundup

As we noted yesterday, if your assumption is that the VIX is p, when what it really is is q, it doesn’t make any sense to complain when ~p occurs. Several other bloggers joined the fray: Don Fishback makes the crucial point that the VIX range is based on one standard deviation, not the total range of all excepted outcomes, which was the fundamental omission from the article; Bill Luby’s post is especially good on the point that the VIX moves in different patterns across…