Q4 2011 Condor Options Performance Review

The Condor Options newsletter portfolio returned 28% in the final quarter of this 2011, compared with 10% for the S&P 500. For the full year, the iron condor strategy beat the index by 4.39 percentage points, returning 2.59% compared with -1.80% for the index.

In the last quarter of the year, we made a major change to the strategy, expanding the scope of option selling trades to include a full suite of underlyings with exposure to U.S. and international stocks, commodities, bonds, and currencies. Previously, trades had been restricted to options on the S&P 500, but in line with my research on the existence of the volatility risk premium in many different asset classes, the universe of coverage was expanded to allow us to take advantage of more opportunities wherever they emerged, rather than trying to squeeze every last drop of alpha out of the SPX.

We also continued with our dynamic delta hedging regime, an approach to risk management that is common enough among professional and institutional traders, but is still not in the wheelhouse of the majority of the options trading public. As far as I know, our services (this letter, along with Calendar Options) are still the only strategies of this type that teach traders in real time how to manage delta risk in the standard way.

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 returns measure expiration cycles rather than calendar months.

Our average hold time for each position has been about 30 days, and our delta hedging trades are updated weekly but only when needed – so this isn’t a strategy that requires constant attention or active management. We are accepting new clients at this time.


1 Comments For This Post

  1. JP Says:

    Good work Mr. Woodard.

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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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