The Calendar Options second-quarter return trounced the S&P 500 as well as VTY (link below). Our Model Portfolio return was 15.46%, compared to –3.65% for the S&P and nearly –4% for VTY. Overall, market conditions differed little from the first quarter, so it looks like our latest strategy refinements are proving successful. Nevertheless, we continually use feedback from our monthly, quarterly, and annual results to improve the strategy and adapt it to long-term changes in market conditions (more about this below).
The table below (click to enlarge) includes Calendar Options performance data for the fourth quarter, for the past year (trailing twelve months) and since inception. We’re now including the CBOE Volatility Arbitrage Strategy Benchmark (VTY), because we believe it represents a more comparable strategy than either simply being long the S&P500, or other benchmarks we’ve used in the past. The table is followed by a graph of our returns since inception, compared to these two benchmarks.
Note that all returns are measured from expiration to expiration and do not include the cost of commissions.
As we head into the third quarter, the July cycle continued the trend of better performance under similar conditions with the improvements [available to Calendar Options subscribers only] we made in April. July was our most challenging month since February, when our Model Portfolio loss was more than 9%—and yet we still significantly outperformed the S&P 500, with a Model Portfolio return of –3.74%, compared to a –4.71% return for the S&P.
The one circumstance we may be able to improve on with further refinements to the strategy is the whipsaw bottom. No strategy can avoid occasional losses, but I’ll be looking at ways to increase our odds of doing better when we’re in a bottoming climax, without compromising the risk-management rules we’ve put in place to protect ourselves from outlier events (i.e., crashes).Homepage photo courtesy of Flickr user p_c_w, under Creative Commons license.