The markets pulled back today and the talking heads attributed it to the Euro's weakness due to concerns about Greece causing a strengthening in the dollar and therefore weakening the stock markets. However, as most of us have observed over the past several months, the inverse relationship between the dollar and the markets is anything but consistent. Those of you in our webinar last evening will recall our discussion of the declining volume in the S&P 500 over the past five sessions as new highs were being made - clearly a bearish sign. But I don't think this amounts to anything more than some profit taking after a huge bull run. Trading volume was markedly up today, probably due to quadruple witching expiration - contracts for index options, stock options, single stock futures, and index futures all expired today. RUT closed at $674, down a little less than $8 and the SPX gave up almost $6 to close at $1160.

My April iron condor was assisted by this move down today, the delta for this position now stands at -$19, pretty close to delta neutral, while theta is +$85. Someone in the Trading Group webinar asked why we didn't roll up the put spreads that are over two standard deviations OTM to move this position into profitable territory. My answer was that I was concerned about a pullback after such a huge run upward, especially in light of the recent declining trading volumes. We will be watching for signs of stabilization before rolling up those put spreads.

I was also asked last evening if the trouble with my March and April iron condor positions suggests that this strategy "doesn't work anymore". Trading the iron condor, or any delta neutral strategy, is a probabilistic strategy. Occasional losses are expected; the key success factor is a system of risk management that minimizes the losses so that the more frequently occurring gains are not wiped out. My loss of $2,850 in March is approximately what I gained in February ($2,794); my blog trading account is still up 36%. This trading strategy is like being in the insurance business; we will have claims (losses). As long as the claims don't wipe out the premiums collected on all of those policies, our insurance company will remain profitable. As long as our system of risk management minimizes our losses in the "bad" months when the market takes off in one direction or the other, our account will continue to have net gains.

However, if you started your insurance company a month or two before Hurricane Katrina hit, you might be discouraged and wonder if you were in the right business. Those of you who just decided to try trading the iron condor in March are in the same predicament. Hang in there. Use this time to reassess the risk management of your trading system. Keep fine tuning your system; continue to learn and improve. It is a feasible business.