...I'll get to the “and” later.
First, a respectable comeback from last month's loss gets us off to a good start for the second quarter. For April we booked a Model Portfolio return...
Friday, March 9, 2012
As we enter the last hour-and-a half of the Friday session a week before March options expiration, the picture for next week is no more clear than it was yesterday. The S&P 500 Index is in its third overbought day, on a short-term basis (15-minute, 30-minute and 60-minute charts), and yet shows no sign of weakening. SPY is about $0.20 from our upside adjustment trigger. We’d have little concern if expiration were two or three weeks away, or if the…
Friday, March 2, 2012
After four-and-a-half years of elevated volatility, it can be hard to believe that sometimes nothing happens. I saw one headline this morning heralding the ninth straight week of gains—which, among the major indexes, is only true for the Nasdaq 100…but no matter. Fact is, the broader market, as measured by the S&P 500 Index, isn’t far from where it was a week ago, or even from the short-term peak nearly two weeks ago. So this is great for our market-neutral…
Monday, February 27, 2012
We’re in a bit of an up-hill battle this month, with SPY implied volatility in the doldrums and tending to skew toward the March contracts. Nevertheless, the G20 (non-)decision to postpone any commitment to bail out the Eurozone, appears to have kept support under April IV for the time-being. Shortly after the close of trading this afternoon, our one open position was showing an unrealized loss of about 7.5%—which, because we’ve been conservative with our trade entries in…
Wednesday, February 22, 2012
The S&P has gone nowhere since Friday, and the VIX is flat as well—but the position we opened Friday morning is showing a moderate unrealized loss. The culprit, quite simply, is a half-point drop in the average implied volatility for SPY options. The premium in both the March and the April contracts, both on average and at the strikes used for our one open position, has fallen, with the drop in implied volatility reflected more in the price of our…
Tuesday, February 14, 2012
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…
Monday, February 6, 2012
As of about 1:10pm Eastern, our portfolio of open positions was showing an unrealized loss of approximately 2.7% on total capital at risk, for a Model Portfolio return of about –1.6%. Delta is neutral, and vega is up slightly from Friday, at about 6.4% of capital at risk. Considering the fact that we’ve been through one of the steepest four-month sustained drops ever recorded in the VIX (perhaps the steepest, depending on how you measure it), our continued ability to…
Friday, January 27, 2012
The VIX recovered a (very) little bit of ground since Wednes- day’s adjustment trade, but average implied volatility for SPY options is down an additional nine-tenths of a point (4.4%). That means our P/L curve has continued to sink. Just before the close of options trading on Friday, our unrealized return on capital at risk was approximately –7.6%; however, because we’ve held back on committing additional capital with IV in free-fall, our…
Monday, January 23, 2012
Last week SPY-options implied volatility dropped by almost 15%, which, along with the share price climbing above the center of our risk curve, was a drain on both unrealized return and projected profit at expiration. However, following the strategy rules for managing volatility risk with our entry trades is paying off: at Friday’s close, the unrealized return on our February trades was up from the week before. In post-session options-trading, we were showing about a 3.8% unrealized return on total…
Saturday, January 14, 2012
Since we closed out our January positions this week, the lede for this Update normally would be a quick review of the month’s results. I stopped posting stand-alone monthly performance reviews a long time ago, in an effort to help members stay focused on what’s important: long-term risk-adjusted returns. But as I thought about how we handled this cycle, and how that compares to last month’s trading and results, I saw a number of valuable lessons about risk-management that are…
Saturday, January 7, 2012
Leaving aside the newly opened February/March Double-Calendar, our portfolio of open positions is currently showing a return (realized and unrealized) of approximately 5.4% on total capital risked. That represents a Model Portfolio return of about 3.3% after accounting for the cash we kept in reserve for hedging our January portfolio and entering February trades. As the trading week drew to a close Friday afternoon, our January positions had a slightly bearish net delta…
Jared Woodard is a registered commodity trading advisor who specializes in trading volatility as an asset class. With over a decade of experience trading options, futures ... Read More
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Wednesday, April 25, 2012
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