Archive | Strategy

Same trade, different reasons

Tuesday, July 31, 2012

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Here's a question we received recently from a client, asking about the relationship between the vertical spreads we trade in the ETF Trend Options strategy and the iron condors associated with our...

ETF Trend Options Now Available

Monday, April 16, 2012

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In a previous post (“Combining Trend Following and Option Selling Strategies“), I explained the appeal of marrying two seemingly opposed approaches to the market within one strategy, which we’re calling ETF Trend Options. The out of sample results have been excellent so far, with a 25% annualized return since inception versus a gain of 9% in the S&P 500.  I’m excited to announce today that ETF Trend Options is now available by subscription. Here are key things…

Financial Innovation and Complexity

Monday, April 2, 2012

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It’s become really popular in the financial media to rail against the complexity of financial products. For products offered to the public, those complaints seem justified. Mortgages are too complicated and trap-laden, in some versions, and the “vanilla product” idea championed by Elizabeth Warren for the CFPB seemed like a winner to me. On the investing side, the TVIX saga is just another example of why ETPs whose sole purpose is to offer access to more leverage should never…

Combining Trend Following and Option Selling Strategies

Thursday, February 2, 2012

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Historically, two of the most successful approaches to trading have been trend following and option selling. Trend following and momentum investing are strategies known to just about everybody, and option selling (i.e. collecting the volatility risk premium), while not quite as famous, is hardly a closely-held secret. Usually, these two approaches are treated as strangers. Momentum/trend traders are conceptually long volatility in that they are willing to accept small, frequent losses from choppy markets in order to reap gains…

PWR Strategy: The ETF Universe

Tuesday, January 3, 2012

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In two previous posts (here and here), I introduced a tactical asset allocation or “rotational” strategy that uses relative strength and momentum criteria to select ETFs on which we can sell bullish vertical put spreads. The attached table shows the list of ETF candidates we select from each month. The list represents every major asset class including U.S. and international stocks, U.S. bonds, oil, gold, agricultural commodities, the dollar, and the euro. Let’s review some omissions. With the exception of iShares

Introducing the Pietsch-Woodard Rotational Strategy

Sunday, December 11, 2011

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I have been working with my friend Jeff Pietsch, a fellow professional trader, to develop a low-frequency, rotational ETF strategy suitable for trading via options. On Friday, I announced that strategy signals and updates would be made available exclusively via TheStreet’s Options Profits service. In the future I do plan to repost substantive commentary and performance updates for the strategy here at Condor Options, but not specific trade signals. In this post, I want to introduce the primary features of…

Introducing the VIX Portfolio Hedging (VXH) Strategy

Tuesday, September 7, 2010

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Since the 2008 financial crisis, I’ve been contacted regularly by clients and readers who are looking for effective and cost-efficient methods for hedging their portfolios. The more time I’ve spent researching the topic, the more I’ve become convinced that most widely-known methods are ineffective as hedges, inefficient from a cost standpoint, or both. After nearly a year of research, I have developed an alternative method that can provide meaningful protection against sudden and/or large market declines while not imposing excessive…

Using VIX Hedges to Reduce Strike Dependence

Wednesday, June 30, 2010

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Equity investors who want a broad-based hedge have essentially three vehicles from which to choose: equity index options (SPY, SPX, ES, etc.), VIX futures (or their ETF permutations), and VIX options. In this piece, Larry McMillan makes the case for using VIX options instead of SPX derivatives, and this is his best argument: In my opinion, the purchase of VIX calls is a much better, more dynamic way, to approach protection. That is because VIX will explode…

The Allure of Deep Out-of-the-Money Options

Thursday, December 31, 2009

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For an options trader, one of the most remarkable aspects of the 2008 financial crisis was that it featured months in which many options closed in or near the money when, even weeks before, they were deep out-of-the-money (DOTM) and “worthless.” The lesson is that ostensibly overpriced options are totally devoid of value, until they aren’t. This is not a new lesson: academics have spent decades creating and testing different models (Hull and White, Heston, Dupire, etc.) to better accommodate…

How to Be Risk-Averse

Thursday, November 12, 2009

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Felix Salmon is skeptical about the ability of average investors to protect themselves from major economic risks: [T]here really isn’t an easy or obvious way for an investor to be highly risk-averse in this market, not when one of the biggest tail risks that people want to protect themselves against is inflation. Big investors can try taking the Taleb approach of buying large numbers of out-of-the-money options and reckoning that a bunch of them will pay off when the next…

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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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