iron condors

[HowardCohodas]

[ANCOLL]

@Howard
I would like to know in detail, what's happened on March'11?

thanks in advance.

[HowardCohodas]

@Howard
I would like to know in detail, what's happened on March'11?

thanks in advance.

I did not have sufficient cash reserves to buy back all the spreads that reached their stop loss limits. As I was liquidating other spreads to raise cash, the market rapidly overran my position and put me deeply in loss for the spreads that were in trouble. Had I maintained a proper cash reserve, the month would have been closer to zero, plus or minus a small amount.

From feedback in some forums, I learned that my cash reserves were too small, and I was slowly building them up as expirations arrived. I simply did not do this quickly enough.

I now have an analytic method of allocating my resources among the two instruments I trade (NDX and RUT) and among the time frames I trade (weekly, near month, and the month after the near month) and cash. A lesson learned at significant cost. But then, aren't they all.

[ANCOLL]

I did not have sufficient cash reserves to buy back all the spreads that reached their stop loss limits. As I was liquidating other spreads to raise cash, the market rapidly overran my position and put me deeply in loss for the spreads that were in trouble. Had I maintained a proper cash reserve, the month would have been closer to zero, plus or minus a small amount.

From feedback in some forums, I learned that my cash reserves were too small, and I was slowly building them up as expirations arrived. I simply did not do this quickly enough.

I now have an analytic method of allocating my resources among the two instruments I trade (NDX and RUT) and among the time frames I trade (weekly, near month, and the month after the near month) and cash. A lesson learned at significant cost. But then, aren't they all.

THanks for the explanation..

usually I preserve 20% of my account when trading credit spread and other margin trade..

Just in case for adjustment and buy back the spread..

[NakedTrader]

Howard, are your results quoted based on (Ending Acct Bal. - Starting Acct Bal.) / Starting Acct Bal. ?

I just want to make sure these numbers aren't the average of the IC spreads themselves, as opposed to factoring in all commissions, costs, and un-deployed capital in the account.

It is just my opinion that reporting results should always factor in all capital requirements and total margin required to give an apples to apples comparison across strategies. Too frequently, traders and "gurus" post results without putting them in context to the entire account or capital required to make the trade. I'm not saying you do this but I just want to clarify.

Reporting a 10% return on an Iron Condor is not a fair report if you were also keeping 30% available capital for adjustments. I can go further in-depth about my reasoning if you would like, but its ultimately misleading to the uninformed reader if results are only reported on the spread.

[HowardCohodas]

Howard, are your results quoted based on (Ending Acct Bal. - Starting Acct Bal.) / Starting Acct Bal. ?

I just want to make sure these numbers aren't the average of the IC spreads themselves, as opposed to factoring in all commissions, costs, and un-deployed capital in the account.

It is just my opinion that reporting results should always factor in all capital requirements and total margin required to give an apples to apples comparison across strategies. Too frequently, traders and "gurus" post results without putting them in context to the entire account or capital required to make the trade. I'm not saying you do this but I just want to clarify.

Reporting a 10% return on an Iron Condor is not a fair report if you were also keeping 30% available capital for adjustments. I can go further in-depth about my reasoning if you would like, but its ultimately misleading to the uninformed reader if results are only reported on the spread.

Here is a post I made in another forum that I believes answers the questions you asked and perhaps a bit more. Let me know if it need additional explanation.

I report only on the isolated account devoted to trading index options credit spreads. Any discussion regarding my complete portfolio is outside of my reporting here and mentioned only in response to questions.

I report my results in three ways, each aimed at communicating a different perspective of the strategy.

The month on month graph reports the account change from month to month. It therefore incorporates the results of trading, the size of the cash reserve and trading costs. There is no variation in accounting for profits vs. loses. It is strictly the account balance month to month.

The Iron Condor report addresses the return on a chunk of quarantined funds used to support credit spread trading in a given series. The implications here are that the same chunk of funds are used to cover one or more spreads. One spread if its mate that would form an Iron Condor is unavailable. Two if the mate is opened. More than two if one of the spreads is closed at 80%+profit and a spread is opened to replace it using the same funds.

The spread report is the most granular. It reports the return on the spread by itself, even if no additional funds were required because it was part of an Iron Condor.

[HowardCohodas]

April was tough but not as bad as March.

[tptrading]

Charles have you ever posted your trade rules for these RUT verticals? Also what TA or indicators do you use?

Regards,
Tptrading

aw,
Never did the tax leins --- took too much time.
Am doing RUTs but for February only the PUT side. My rules have not let me get into the CALL side yet.
Chuck

[Mojo]

Charles is likely gone on travel (if not pls chime in). Here is what I remember from his rules:

1) At least 30 days out from expiry.
2) Establish trend with moving averages and support & resistance.
3) Place short vertical counter trend (bearish when the trend is bullish).
4) Make sure there is at least 2 points of support (or resistance) between you and your short vertical strike.
5) Make sure your shorts are at least 10% of the stock price away.


He often didn't trade full iron condors unless the market wasn't trending. There were several years of 60% or better returns!

HTH,

Mojo