SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

Steady Condors 2015 Report: 46.7% Return


This week we closed our December trades with gains of 6.7% on margin, and 5.1% return on 20k unit. This makes the 2105 year non-compounded return 46.7% on a whole account (including commissions). If we reported returns like most other services do (Compounded ROI before commissions), we would report 80.8% gain.

As you noticed, we closed our December trades two weeks before expiration, to reduce the negative gamma risk. We recommend reading the Why You Should Not Ignore Negative Gamma article to understand the gamma risk.

 

This is another thing we do differently from many other services. We open our trades early and close them early. We would typically open the trades 6-8 weeks before expiration and close them 2-3 weeks before expiration. Here is the P/L chart for 2008-2015 (live trading began in late 2012 as shown on the performance page):

 

f2bd1d667cb826ee08e1693a19744861.png
The chart presents non-compounded P/L on 20k account, including commissions. Total P/L since Jan. 2008 is $38,502 or 192.5%.

 

Anyone who has traded more than a handful of non-directional iron condors knows they can be extremely challenging in a trending market potentially causing a lot of stress, large drawdowns, and significant losses. They aren't the Holy Grail (no single strategy is). It’s normally relatively easy to make money with high probability condors 9 or 10 months per year when the markets are range bound…But many condor traders give back most or all of their profits during the usual 2 or 3 losing months each year when the markets do make large moves because they lack a detailed plan for risk management.

 

“I would have had a great year if it wasn’t for one or two months”. If you trade condors without a detailed risk management plan you will eventually experience large losses. Since our trading strategies naturally have a high expected monthly win rate our risk management objective is to avoid giving back much more than one month’s average earnings during our losing months.

 

This is why we introduced the Steady Condors. We tweaked the traditional Iron Condor strategy to address the issues and make the P/L curve much smoother.

 

As we always say, you can't control returns, only manage risk. I really dislike when people make trading sound like if you are really good at it you somehow have control over your returns. The only thing you can do is build a winning strategy (better yet, multiple winning strategies with low correlation) and then manage your risk and position size so that you stay in the game long enough to let your edge work out over the long term.

 

What risk management does is lower your win rate in order to maintain positive expectancy. It often sounds counter intuitive to new traders to learn they need to win less in order to make more money (or make any money at all) over the long term. We urge you to be very cautious about any service that only promotes a high win rate. Win rate alone tells you absolutely nothing. How many times do you get emails about a "options strategy with 99% winners" and "make $xxxx dollars per month". Unfortunately, humans desperately want to believe there is a way to make money with virtually no risk. That’s why Bernie Madoff existed, and it will never change.

 

It is also important to remember that Steady Condors reports returns on the whole portfolio including commissions. Our 20k unit will have two trades each month (the RUT MIC and the SPX MIC). With 20% cash, we will allocate ~$8,000 per trade. If both trade made 10%, that means $800 per trade or $1,600 total for the two trades. In our track record, you will see 1,600/20,000=8%. Other services will report it as 10% (average of the two trades). In addition, our returns will always include commissions. If you see 5% return in the track record, that means that $100,000 account grew to $105,000. Plain and simple. If we were to report returns on margin as most other services do, our returns would be about 50-60% higher. For example, 2015 return would be 80.8%% and not 46.7%.

 

Another point worth mentioning is rolling. If you look at some services, you might see few last months of data missing. That would usually mean that the trades were losing money and have been rolled for few months, to hide losses. In some cases, the unrealized losses can reach 25-50%. Rolling might work for some time - till it doesn't, and unrealized losses become realized. By then it's usually too late. It is very important to know how returns are reported, in order to make a real comparison. Always make sure to compare apples to apples.

 

As a reminder, Steady Condors is a strategy that maximizes returns in a sideways market and can therefore add diversification to more traditional portfolios. Selling options and iron condors can add value to your portfolio. They aren't the holy grail. Just like everything else. Both our Anchor and 15M strategies (available on the LC Diversified forum as part of any membership) have had negative correlation of monthly returns to Steady Condors and therefore have blended together nicely for a diversified and relatively low maintenance portfolio.

 

Click here to read how Steady Condors is different from "traditional" Iron Condors.

 

Related Articles:

 

Why Iron Condors are NOT an ATM machine
How to Calculate ROI in Options Trading
Why You Should Not Ignore Negative Gamma
Can you double your account every six months?
Can you really make 10% per month with Iron Condors?

 

Want to join our winning team?

 

Start Your Free Trial

What Is SteadyOptions?

Full Trading Plan

Complete Portfolio Approach

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • Holiday Effect in VIX Futures

    With fewer trading days and a historical record that favors an uptick in stocks and a downtick in volatility, the end of the year never fails to present an intriguing set of trading opportunities. One phenomenon related to the above is something I have labeled the “holiday effect". 

     

    By Bill Luby,

    • 0 comments
    • 19 views
  • Fatal Flaws in Black-Scholes

    Is the Black-Scholes pricing model of options accurate? Or even close to accurate? A very interesting study conducted by Sibson Consulting was cited in an article on the topic (Tim Reason, “The Holes in Black-Scholes,” CFO Magazine, March 1, 2003).

    By Michael C. Thomsett,

    • 0 comments
    • 567 views
  • The Hidden Dangers of Iron Condors

    Ever seen those ads about making 5% per month with Iron Condors? It’s certainly possible, but you would have to be a bit naïve to think making a 60% per year return is simple. Most professional money managers cannot achieve those returns, so why would a retail trader be able to achieve it?

    By GavinMcMaster,

    • 2 comments
    • 719 views
  • Assignment and Exercise: The Mental Block

    Assignment and Exercise are among the most basic aspects of options trading that every options trader should understand. In this post I painstakingly explain one of the most basic option basics to a reader who is having trouble understanding that concept.

    By MarkWolfinger,

    • 0 comments
    • 192 views
  • 4 Levels of Trading Experience

    I would like to share with you another aspect of trading- my fascination with the different levels of trading experience. Starting in one of the latest discussions in the comments section, I shared with one of you that experience in trading comes in stages. I call those the 4 Levels of Trading.

    By Colibri Trader,

    • 0 comments
    • 841 views
  • The Spectacular Fall of LJM Preservation and Growth

    Investors of LJM Preservation and Growth Fund, a $772 million alternative mutual fund, got an email on Tuesday February 6, 2018: "LJM strategies have suffered significant losses." The fund (ticker: LJMAX) didn’t report the loss until late the following day, so shareholders were in the dark as to what happened.

    By Kim,

    • 0 comments
    • 483 views
  • 40 Steps In The Trader’s Journey

    It is a well known fact that most retails traders/investors lose money in the stock market. There are many explanations for that phenomenon. Trading is a journey, and not everyone is willing to complete it. Many quit too early. Here are 40 steps in the trader’s journey from new trader to rich trader. They are as follows:

    By SJosephBurns,

    • 0 comments
    • 1,108 views
  • 10 Things You Should Know About VIX

    The CBOE Volatility Index, known by its ticker symbol VIX, is a popular measure of the stock market's expectation of volatility implied by S&P 500 index options, calculated and published by the Chicago Board Options Exchange (CBOE).VIX is considered by many a "Fear Index".

    By Bill Luby,

    • 2 comments
    • 1,774 views
  • How Does SVXY Work?

    There are many more ways to trade volatility today than there was prior to the financial crisis. Numerous ETF’s and ETN’s have been created as a way for traders to hedge volatility risk or gain exposure to it. Some of these are leveraged 2 and 3 times. To say they can be risky would be an understatement.

    By GavinMcMaster,

    • 0 comments
    • 2,106 views
  • 50 of the Top Trading Quotes Ever

    While trading quotes can be taken out of context, and it is crucial to have a full understanding of what the trader meant at the time, they can also give traders important insights.  I asked some of my followers for their favorite trading quotes. There were a lot of great suggestions, but here are the top 50 that I’d like to share.

    By SJosephBurns,

    • 0 comments
    • 985 views

  Report Article

We want to hear from you!


There are no comments to display.



Your content will need to be approved by a moderator

Guest
You are commenting as a guest. If you have an account, please sign in.
Add a comment...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoticons maximum are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

Options Trading Blogs