August Monthly Review

Last weekend, we noted that the next phase of this bear market will likely be driven not by U.S. financial companies or by energy prices per se, but rather by the effects of the American slowdown being felt by the rest of the world.  A front page story in the WSJ on Friday noted the falling Eurozone GDP as additional evidence of a global slowdown.

Looking forward, we expect continued bullishness in equities next week as the lack of major news and the seasonal drop in volume draws in more hopeful investors.  But we won’t be surprised if those same buyers are punished for their optimism as the bearish tendencies of September and October kick in.  Members can check out our proprietary market sentiment indicator in our weekend portfolio update.

Performance Comparison

Here’s how the major market indexes, the S&P 500 Covered Call Fund (BEP), and the Condor Options trades performed over the past month:

  • S&P 500: 2.97%
  • Dow Jones Industrials: 1.42%
  • Russell 2000: 8.69%
  • S&P 500 Covered Call Fund: 2.71%
  • Condor Options: 11.03%
  • Note: the period measured is from expiration to expiration, rather than from the start of the month.

Another winning month – we beat our chosen benchmark (BEP) handily, and even surpassed the monstrous Russell 2000.

August Iron Condors

  • SPY 117/119/135/138: 34.26% return.  This skewed position included an embedded 137/138 call vertical, which brought in a little more credit but also kept our downside risk very small.  The SPYs traded several points lower during the first week of the trade, such that we could have closed out the embedded vertical for about 0.06 or less.  We closed out our short calls on August 11 and allowed the remaining bits to expire worthless.
  • IWM 58/60/72/74: -8.21% return.  This was a simple case of sound risk management.  We exited the trade for a small loss to reduce our risk exposure in the face of this market rally.  It’s easier to shut down small losers when you have big winners also on the books (see above), but either way it pays not to fight strong trends.
  • SPY 111/113/130/132: 7.04% return.

August Reading

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

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More


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