Wealthy investors continued to put more money into hedge funds this past quarter—even as those elite funds lost an average of 3.4% in August and 3.7% in September—while the Calendar Options newsletter portfolio, by contrast, saw a return to its historic growth path despite a level of market volatility not seen since 2009. Although we have yet to fully recover from a record drawdown in the second quarter, our process of continually refining the strategy—with our primary focus on risk-management—produced third-quarter results that handily outperformed the benchmark strategies we use for comparison.
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. The CBOE Volatility Arbitrage Strategy Benchmark (VTY) represents a more comparable strategy than either simply being long the S&P 500, which is the standard industry benchmark.
We follow the above table with a graph of our returns since inception, compared to our two key benchmarks. Note that all returns are measured from expiration to expiration and include slippage but not the cost of commissions.
Naturally, any investment strategy is only as good as its long-term risk-adjusted returns. As the graph above shows, we’ve had periods of spectacular returns, but those big wins came at the price of extreme ups and downs. By targeting smaller monthly gains (but still significantly greater than our comparison benchmarks), we hope to continue having exceptionally profitable quarters—regardless of whether the market goes up, down or sideways—while reducing drawdowns and making fewer adjustments to our trades. It’s worth noting, however, that even with all the ups and downs over the past 12 months, our annualized return since inception is still about double (again, not including commission costs) what used to be considered the average market return of 7%–8% (before the finance industry crippled the world economy), with risk measures comparable to both the VTY and the S&P 500 Index.
To find out how we’ve accomplished this, just go to the Products page and sign up for access to our members-only newsletter blog as well as real-time trade alerts and in-depth trade and strategy analysis.