ROI Note Iron Condor Dec 2014

2014 was a difficult year, primarily from the Federal Reserve’s Quantitative Easing Program (QE) that printed trillions of US dollars to buy US bonds and mortgage backed securities. As a result of the Fed flooding liquidity into the US financial system, the stock market had an artificial upward bias that made it difficult to trade non-directional “selling” strategies, such as index credit spreads and iron condors.

During difficult times we pro-actively manage and adjust the trades that go against us to keep our losses manageable. We have more than a 15 years of combined experience in trading credit spreads and iron condors, along with complex adjustment strategies, and we were able to keep our losses manageable at a negative 13.6%. When times get tough the primary objective is to keep the losses as low as possible so we can trade another day, and we successfully achieved this objective.

On the positive, the Federal Reserve turned off their printing presses in late 2014 and the market is behaving differently now, where it’s mostly back to trading on fundamentals at higher levels of volatility. Based on how the market has been trading on higher volatility since January 2015, options “selling” strategies such as credit spreads and iron condors are optimum for this environment, so we are confident that we can get back to work in making positive, monthly returns.