Tag Archive | "risk management"

Q4 2012 Condor Options Performance Review

Tuesday, January 15, 2013


The Condor Options newsletter portfolio returned 21% in 2012, versus 17% for the S&P 500. The strategy also beat the S&P 500 in the final quarter of the year, giving back 1.1% versus the SPX loss of 2.05%. We also bested the CBOE Volatility Arbitrage Index (VTY) for the year by about 3 percentage points. The purpose of the strategy is to profit from the volatility risk premia that are priced into options. While the volatility risk premium is a consistently…

Q4 2010 Condor Options Performance Review

Wednesday, January 26, 2011


In last quarter’s review, I mentioned two things: that we were adding a dynamic delta hedging component to the official newsletter strategy, and that after the newsletter’s underperformance in Q3, the long-term historical record for the strategy suggested that it was actually an optimal time to increase exposure. Happily, that expectation turned out to be true, and the delta hedging component had a very positive effect on performance. The strategy returned 5.67% in the last quarter of the year (and,…

VIX Portfolio Hedging (VXH) Strategy – Performance and Official Launch

Tuesday, November 16, 2010


The VIX Portfolio Hedging (VXH) Strategy is being offered to the public for the first time, starting today. The strategy is available via professionally managed accounts, or available by subscription here. First-time visitors may want to start with the previous posts on this strategy: Introducing the VIX Portfolio Hedging (VXH) Strategy Why Conventional Hedging Methods Fail VIX Portfolio Hedging in a Crisis-Free World The Discreet Charm of the VXX ETN If your portfolio isn’t already protected against…

Bonus Trade: SPY November Butterfly

Monday, November 8, 2010


Our paid newsletter strategies are predicated on the expectation of mean-reversion (with risk-management rules for containing losses in trending markets)—in implied volatility as well as in price of the underlying. But when we find ourselves in a strong bullish trend, it's often desirable to both increase delta and decrease vega. One great way to do this is with butterflies...

The Discreet Charm of the VXX ETN

Thursday, October 28, 2010


This is the fourth post in the series I’m writing to introduce the VIX Portfolio Hedging (VXH) Strategy. To review: the purpose of the VXH Strategy is to provide cost-effective protection against tail risks and market crashes. The strategy takes positions in short-term VIX-based products, and varies its allocation to those positions in response to changes in the market environment. In this post, I discuss the use of the iPath S&P 500 VIX Short-Term Futures ETN

VIX Portfolio Hedging in a Crisis-Free World

Tuesday, October 12, 2010


This is the third post in the series I’m writing to introduce the VIX Portfolio Hedging (VXH) Strategy. The most important feature of the VXH strategy is that it offers protection against severe market declines. Almost equally important, however, is its performance during normal market environments. A hedging strategy that profits during a market crash is no help at all if it imposes heavy costs the rest of the time; this is one of the chief limitations of conventional…

Why Conventional Hedging Methods Fail

Monday, September 27, 2010


This is the second post in the series I’m writing to introduce the VIX Portfolio Hedging (VXH) Strategy. I am discussing the problems with conventional portfolio hedging methods first – before getting into the details of the VXH strategy – because if widely-known conventional methods are suitable, then there’s little reason why anyone should consider a novel method. The two conventional hedging methods I’ll review are diversification (Modern Portfolio Theory), and portfolio insurance using long put options and option…

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

Thursday, December 31, 2009


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


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…

The Lazy Guide to Delta Hedging

Friday, July 10, 2009


In my last post on this topic, “Why Delta Hedging Matters,” I argued that an essential aspect of options trading is hedging away unwanted risks. For most traders, the unwanted risk is usually to directional price movement, or delta risk.  We discuss this issue in the context of trading iron condors a fair amount on the members area of the site, but the principle is just as important whether you’re short one call contract or managing a book of…


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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