If your satisfied with (AVG - RiskFree)/StdDev then after five months the answer is 3.3% using monthly month on month returns in my entire account which includes 15% to 20% cash.
HowardCohodas Index Options Credit Spread Trading Journal
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If your satisfied with (AVG - RiskFree)/StdDev then after five months the answer is 3.3% using monthly month on month returns in my entire account which includes 15% to 20% cash.
When Iron Condors are formed, which is most of the time, the portfolio is nearly delta 0, and slightly negative gamma, but hugely negative vega. Vega dominates and, I believe, is the primary driver in the success of this strategy. Expectancy requires some detail in understanding the risk mitigation measures. I have a module on understanding the risk of this strategy.
I know this is probably blindingly obvious, but just to confirm, 3.3% is your average return over all of your invested capital? Just wondering to satisfy my curiousity. Like nLepwa I've been trying to figure how you could get such high returns with just IC's. But if 3.3% is it, that's a lot more reasonable for the short time you've been at it.
Those figures are on the entire account that is devoted to Index Options Credit Spreads, but not counting other accounts for other investment strategies. And this account has had 15% to 20% cash. I'm raising it to 20% to 25% for additional protection from a black swan event.
Returns averaging 20% for Iron Condors are obtained as a consequence of rolling. I have had up to 5 credits for one series, two of which returned around 50%. The numbers could be made to look better if I separated weeklies from monthlies. Monthlies have a 60 day cycle which provides the opportunity to roll. Weeklies do not. Weeklies have a lower return, but cycle up to 8 times for the monthlies one.
I probably should separate weeklies and monthlies or normalize one to the other, but I'm not unhappy reporting a lower number than might be justified.
That's fine. It's just that the god of IC's makes 5% monthly consistently, or claims to anyway, and my own experience is that 2% is doable, 3% if you stretch it, and anything beyond that takes more risk than should really be taken by ordinary mortals.
That's before taking into account the inevitable huge drawdown, of course, which is always lurking just around the corner with these things. Once that happens, the returns get more realistic.
That's before taking into account the inevitable huge drawdown, of course, which is always lurking just around the corner with these things. Once that happens, the returns get more realistic.
As I unfold the details of my strategy, I look forward to feedback from those that know more about these things than I do to point out areas where I am taking unrealistic risks.
The primary reason for disclosing things down to the trade level is for all of us to learn something. Selfishly, I hope to be a big learner here.
BTW, who is the god of ICs?
See this article, although you have to sign in to access it. But it's free once you register with them. Guy's name is Dan Harvey, and he learned from someone else named Dan Sheridan, according to the article:
http://www.sfomag.com/article.aspx?ID=1260
http://www.sfomag.com/article.aspx?ID=1260
I subscribed to SFO magazine in the middle of Dec. Thanks anyway.
12 JAN 2010 Trading Plan
The Dashboard above informs me as follows:
Opportunity - Takeoffs are optional
Spread #61 is unpaired. Opportunity to form an Iron Condor.
Spread #75 is at 82% of it's capped profit but has only 1 day left until expiration. No opportunity to roll.
Spread #50, #69, and #61 at more than 80% of capped profit. Opportunity to roll.
Jeopardy - Landings are mandatory
No spreads show excessive probability of touching. Yellow in gauge.
Spreads #75 & #76 have 1 day remaining to expiration requires monitoring. Red in gauge. Red highlight in cell.
Two spreads show slightly negative return. No action required.
New Opportunity
None
Yes! I got out of my depth quickly here too.
I did get that he is using second month ( 60 day ) options, which is something I never thought of, but seems like a good idea. Even though doing the spreads for same month. I wonder when he rolls over, if Howard is still doing the 60 day options.
I got that returns were based on individual spreads, presumably as a small amount of an account size. Still if you are compounding the returns should be good. My own trial and error test all last year, indicated an account of $25,000 was really minimum that could be traded and even so, one had to trade almost all of it, to get a decent income to live off. That would presume then, an account size of quarter million would be appropriate if trading with $25,000 to get decent returns.
I´d like to thank Howard for opening this discussion into the details. The trouble with the SPX Credit Spread Trader forum was nobody discussed the details to make it understandable and helpful.
What I did glean from this discussion, was that a rollover was done when 80% of profit was reached and presumably into a better new support level. That was food for thought!
I did get that he is using second month ( 60 day ) options, which is something I never thought of, but seems like a good idea. Even though doing the spreads for same month. I wonder when he rolls over, if Howard is still doing the 60 day options.
I got that returns were based on individual spreads, presumably as a small amount of an account size. Still if you are compounding the returns should be good. My own trial and error test all last year, indicated an account of $25,000 was really minimum that could be traded and even so, one had to trade almost all of it, to get a decent income to live off. That would presume then, an account size of quarter million would be appropriate if trading with $25,000 to get decent returns.
I´d like to thank Howard for opening this discussion into the details. The trouble with the SPX Credit Spread Trader forum was nobody discussed the details to make it understandable and helpful.
What I did glean from this discussion, was that a rollover was done when 80% of profit was reached and presumably into a better new support level. That was food for thought!
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