After that tremendous move late yesterday in the RUT, we will be closing out our iron condor today.  When the daily trade signal went out yesterday the trade was only down a few percent, well within the stop loss range, but then a massive late day run up took us over the line and our hand is now forced.  As you know I never take excessive risks and I’d rather just cut and run and live to fight another day.


I’ve seen far too many traders over the years willing to hang on a few extra days in hopes of seeing a turnaround only to make things exponentially worse.  It’s certainly possible the trade could recover and actually make money.  It’s theta positive so if things stay where they’re at it would actually end up being profitable.  If that happens then sure we’ll look a little foolish for stopping out of it.


But there’s always two sides to everything, and if the market keeps screaming higher things get worse.  In the end it’s just not worth the risk.  We can always recover from smaller losses so we’re stopping out.


Our VTS Iron Condor strategy went 14 straight months without a single loss and was up 38% in just over a year.  It was a heck of a run!  But eventually every strategy pays some of it back when markets do something abnormal.  That’s the part that most people don’t like to acknowledge but I think it’s vital for long term investing success to be brutally honest about the fact that there are always two sides.


All investing on some level involves trading today’s return for future volatility.  Of course we hope the trade off is worth it, but nobody can avoid a little bit of the bad as well.  I call that “the give back.”  Sometimes you can go on extended runs where you don’t pay for it yet and it appears like there is no give back.


It’s important to not allow that to cloud judgement and make us trade differently though.  We still have to maintain the same strategy, the same rules, the same discipline, and keep our allocations diversified.


All of my strategies will go through periods of huge gains where it’s high fives and champaign for everyone, been there done that.  But to help us make conservative portfolio allocation decisions it’s important to remember that all of them will also stumble from time to time which is why I prefer to focus on the decades, not the months.  This month I won’t be getting any medals, but I’m confident I’ll be on the podium 10 years from now.


Current VTS Total Portfolio Solution Allocations

25% VTS Tactical Volatility Strategy

50% VTS Tactical Balanced Strategy

25% VTS Iron Condor Strategy

VTS Conservative Vol Strategy  –  Optional replacement for lower risk tolerance investors


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