Important Note 1: New material has been added to the LTOptions's library. Elephants vs Iron Condors (Full Comparison) is an eBook that details among other things: key differences between the two strategies; pros and cons; which one performs better according to the environment; evolution of the T+0 line over time, etc. This new eBook is visible on the page that comes right after logging in:
Important Note 2: Some modifications have recently been made to the 2018 Options Trading Plan. The changes are focused on efficiency and simplicity when defending Credit Call spreads. Log in to LTOptions.com and consult the 2018 Options Trading Plan ebook.
Important Note 2: Some modifications have recently been made to the 2018 Options Trading Plan. The changes are focused on efficiency and simplicity when defending Credit Call spreads. Log in to LTOptions.com and consult the 2018 Options Trading Plan ebook.
Recent Trading Activity
- On Monday I closed the Feb SPX 2825/2830 Credit Call spreads along with the partial hedges that had been added: Feb SPY 282 Long Calls. A loss on the Credit Calls plus a gain on the long Call hedge. Net net it was a $3300 loss.
- Purchased SPY March 290 Calls as an upside hedge for the 2900/2905 Credit Call spreads on Tuesday.
There's no denying that we are off to a bad start. The bleeding however, is over. Or almost over, as those March SPX Credit Call spreads are suffering losses and they are still in play. Combining all the losses that are direct result of this historic rally, the portfolio will be down by about 9% (2.8% with January positions, about 4.2% with February positions, and about 2% more with March positions - See Track record page).
Usually, Iron Condor / Credit spread traders are down 25% to 30% after a rally of these proportions. Countless of them have sadly disappeared in recent years due to rallies that are nothing compared to this one. This is the worst possible environment for index premium sellers (unless all you do is sell Puts of course). Prior to 2013 the Credit spreads selling business looked almost too easy. It wasn't hard to find several websites discussing Iron Condors, Bear Call Spreads and Bull Put spreads showing impressive returns. Especially after 12 cruel years (1999 - 2011) where the market went nowhere and pundits were saying things like "Buy and Hold is dead" or "The 60/40 portfolio doesn't work anymore". How times change!
Back to our current situation. It has become clear to me that overcoming this draw-down will be a challenge if we intend to do it purely based on Credit Spreads. It is doable, but to achieve it using only that tool takes some months. Consequently, part of our recovery will be based on adopting new tactics, which will be explained below in the Action Plan section.
- On Monday I closed the Feb SPX 2825/2830 Credit Call spreads along with the partial hedges that had been added: Feb SPY 282 Long Calls. A loss on the Credit Calls plus a gain on the long Call hedge. Net net it was a $3300 loss.
- Purchased SPY March 290 Calls as an upside hedge for the 2900/2905 Credit Call spreads on Tuesday.
There's no denying that we are off to a bad start. The bleeding however, is over. Or almost over, as those March SPX Credit Call spreads are suffering losses and they are still in play. Combining all the losses that are direct result of this historic rally, the portfolio will be down by about 9% (2.8% with January positions, about 4.2% with February positions, and about 2% more with March positions - See Track record page).
Usually, Iron Condor / Credit spread traders are down 25% to 30% after a rally of these proportions. Countless of them have sadly disappeared in recent years due to rallies that are nothing compared to this one. This is the worst possible environment for index premium sellers (unless all you do is sell Puts of course). Prior to 2013 the Credit spreads selling business looked almost too easy. It wasn't hard to find several websites discussing Iron Condors, Bear Call Spreads and Bull Put spreads showing impressive returns. Especially after 12 cruel years (1999 - 2011) where the market went nowhere and pundits were saying things like "Buy and Hold is dead" or "The 60/40 portfolio doesn't work anymore". How times change!
Back to our current situation. It has become clear to me that overcoming this draw-down will be a challenge if we intend to do it purely based on Credit Spreads. It is doable, but to achieve it using only that tool takes some months. Consequently, part of our recovery will be based on adopting new tactics, which will be explained below in the Action Plan section.
