Tag Archive | "allocation"

Q3 2010 Condor Options Performance Review

Monday, October 18, 2010


In addition to the regular performance data, I have a couple of interesting items to comment on for this quarterly review. First: for anyone who thinks that global equity markets may have some choppy periods ahead, this is an excellent opportunity to start thinking seriously about the role non-directional strategies should play in your portfolio. Second: we’ve added a dynamic delta hedging component to the newsletter to improve the purity of our volatility trading and to reduce unwanted…

Edge, Execution, Allocation: Pieces of the Trading Puzzle

Tuesday, December 30, 2008


We spend a fair amount of time on this blog looking for trading systems that have some discernible and consistent edge over the market averages.  And edge is important: if you don’t know where your profits will come from, you certainly shouldn’t expect to have any.  But an empirically demonstrable edge is just one of the three components that comprise any good trading system.  The other two, execution and allocation, are also essential to the success of any trading…

Allocation in Abnormal Markets

Thursday, November 20, 2008


As we said to the members this morning, when all your historical studies are broken or unhelpful and the market is behaving inexplicably, there’s really only one sensible way to think about capital allocation: Look at the positions in your account this morning.  If each one of those trades closed at its absolute worst possible price – its “maximum loss point” – would you lose a minute of sleep?  If the answer is yes, your trades are too…

Calendars and Condors: Allocation and the Volatility Factor

Tuesday, November 11, 2008


We often refer to the complementary nature of iron condors and calendar spreads, in that the former benefit from falling implied volatility, while the latter generally get a boost from rising IV. So does that mean you should balance out volatility risk by allocating as much capital to calendars each month as you do to iron condors? Unfortunately, it isn’t that simple. First, it’s important to think about where implied volatility might be headed, especially when it’s at one extreme…

Fire and Forget: Iron Condors Have Built-in Hard Stops

Tuesday, June 10, 2008


We’ve actually made this point before, but it bears repeating: iron condors have hard stops already built in. They’re called “long strikes.” So risk management is incredibly easy when you’re trading condors – it’s simply a question of determining how much capital you’re prepared to lose on any one position, and then selecting the appropriate number of contracts for your trade. Then fire and forget. You don’t need to set some arbitrary mental point at which you’ll exit the…

Playing Defense First

Friday, June 6, 2008

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As you probably saw, the markets staged a broad-based rally yesterday on reasonable volume. The rally kind of came out of left field, as there is still a major divergence across the market indexes, and getting long here seems like a rather risky move. For that reason, we do not plan to adjust our June positions at this time. There’s an old saying that “markets tend to crash down, not up.” But bromides aside, as we have written elsewhere,…


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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