The iron condor newsletter returned about 4.3% in the first quarter this year, slightly beating the 4.2% return for the VTY benchmark. The newsletter did not outperform the S&P 500 on either an absolute or a risk-adjusted basis, which, based on the prior history of this strategy, says a bit more about the market than it does about us. In the review for Q4 2009, I mentioned the most common misconception about iron condors, namely that they are only suitable during a range-bound market. This quarter amounts to yet another data point disproving that opinion insofar as we remained profitable amidst one of the most strongly trending markets in recent history.
Communications from readers, when not altogether sanguine, have been very positive on the market in general; I suppose the gentle drift higher of long-equity account balances soothes any worries that might erupt after looking too closely at the real economy. I don’t espouse macroeconomic views here, and these vapor-driven, fey rallies can linger on longer than anyone would expect, but it’s becoming increasingly tempting to spend just a little on some cheap, medium-term long gamma bets on equities and commodities.
Performance data for the Condor Options newsletter is below, followed by monthly returns and a VAMI (value-added monthly index) comparison. Our benchmark, the CBOE Volatility Arbitrage Index (VTY), tracks the performance of a hypothetical volatility arbitrage trading strategy designed to capitalize on the difference between S&P 500 Index (SPX) option implied volatility and the historical volatility of the S&P 500 Index.
All monthly returns measure expiration cycles rather than calendar months.