Tag Archives | iron condors who is making more money comparing trading results trading when ‘all in’

Is the Other Guy Making More Money than I am? Does it Matter?

Thanks Mark (referring to this Q & A)

The reason I asked was because I too trade mainly condors,
but with 2-month time frames. I stagger them so I have 2 condors on at
any time, and based on regular margins, I'd say I use about 65% of
capital for each position (adjustment capital included). I have
portfolio margin so I have enough (and actually much more leverage
available) for these positions.

I'm just thinking that in order to
compare results with those who trade condors strictly on a one month
basis, and assuming using 100% capital every time, I would have to
multiply my result by 65% for comparison, or something like that.




I understand how you feel.  It's exactly the same as individual investors who loved to open their 401-k reports the moment they saw them in the mail.

Then during the 2008 debacle, many just tossed them aside, unwilling to look.

When you are making nice money, you want to feel extra good about it by knowing you do better than the vast majority of traders.  Competition and all that.

But those are dangerous waters.  Your competition is yourself.  Defeat the demons: trade with as little emotion as possible, enjoy the good times and be prepared to handle the not-so-good times.  Do not get over-confident.  If you do that you win the competition.

If you earn 20% per year, that's so much better than 99% of the population, does it really matter how you compare with the other 1%?  Does it matter when iron condor traders boast of earning 5 to 10% per month – every month.  You know they are not telling the truth, so there's nothing to compare.

To your specifics:  A successful front-month iron condor trader is going to beat you.  That's all there is to it.  Trading front-month iron condors comes with higher risk and higher rewards.  You have already chosen not to compete with them by adopting a more conservative approach.

That aside, if you use 65% of your capital, you don't multiply by 65%.  You divide.  In other words multiply your results by 100/65 to give you 'what you would have earned if you had been 'all in.'

There's a bigger problem that does not concern you because of portfolio margin.  But it's a real problem for those using Reg T margin.  It's that 'all-in' insanity.  When prospering it's natural to want to bet bigger.  Don't do it (OK, do it – but just a small, manageable amount).

You MUST allow some cash for adjustments.  When you have no remaining capital, when an adjustment is needed, your only option would be to close both sides of an IC simultaneously because that's the only way to reduce margin.  Don't place yourself it that situation.


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