Last week we booked a substantial profit on both of our core trades for the February cycle, with only a small loss on the hedge position. Here are the results for each trade:
- SPY February/March Double-Calendar #1 – 8.54% gain on total capital risked;
- SPY February/March Double-Calendar #2 – 19.75% gain;
- SPY February/March Calendar Butterfly Hedge – 0.52% loss.
The average return per trade was about 9%, and the relatively small size of the hedge position meant that the loss on that trade was negligible as a percentage of total Model Portfolio capital. But since we risked only about 60% of that capital, we ended up with a Model Portfolio return of 7.07%. Not exactly a home run, but when you’re in the business of trading options for income, home runs don’t win the pennant; consistently hitting singles and doubles over the long-haul (without giving up too many runs) is how we make it to the Series.
On that note, February’s results bring our average annualized return since inception to more than 17%, compared to just over 6% for the S&P 500 Index (as of today’s close). For the trailing twelve months, we’re now up 5.67%, versus 0.56% for the S&P. Needless to say, we want not only to maintain, but to improve, that long-term record as we look forward to entering our first March position on a dip in implied volatility—ideally, before the week is out.