This is part four in our series, Newsletter and Trading Service Takedowns. This series has become wildly popular, and we really appreciate all of your feedback. This week’s candidate, unlike some of our previous targets, actually seems like something closer to a legitimate business. [Update: cancel that, they seem to run a bunch of different websites offering everything from real estate seminars to "lifestyle health" and personal coaching. Skeezy. And what's with companies trying to sell everything under the sun: whatever happened to "do one thing, and do it well"? Call us old-fashioned.] But we’ll let you draw your own conclusions, and we’ll certainly subject them to the same scrutiny with which we always examine trading newsletters. This week’s candidate is a site called Option Partners, and if you really want to check them out, just stick a .com after their name in your browser. On to the review:

Honest marketing - Fail

Exhibit A is a marketing video that they had professionally produced and is posted on their website and on Youtube. As you can see, it features the standard speedboat, sportscar, and champagne that are trademarks of cheesy marketing videos the world over. As a rule of thumb: if someone promises to make you rich, or promises you boats and cars and riches that you “never thought possible,” they’re lying. One of the tag lines that floats across the screen in this video simply reads “Make Money”; that made us laugh for some reason. One last point of contention: the video claims that the reason that people are rich is because they have experienced options advisors, and that’s just stupid. Some people are rich because they work hard, some are rich because they were born into wealth, and many people are rich because they exploit other people who are poor. No one who wasn’t rich yesterday is rich today just because they hired Option Partners (or us, for that matter, or anyone else): options trading is a great way to supplement your income and to boost your returns, but it’s not the answer to life, okay?

The marketing on their site is pretty muted and boilerplate, and we didn’t find any online advertising to speak of.

Repeatable returns - Pass

For the rest of this review, we’re only going to focus on the “Hedge Series” product that they offer, because it’s the one most similar to what we offer. This is an iron condor newsletter, and they issue 9-12 trades per year. The one positive thing to say about this site it that their performance data is pretty transparent, and they’ve (apparently) been audited by some relevant Australian auditors. Ultimately, they get a pass by default here because, when it comes to iron condors, it’s hard not to have repeatable returns - the strategy is inherently built that way.

Risk management - Fail

This mark of Fail should surprise you. Iron condors are risk defined, so Option Partners’s Hedge Series should get a pass on this, right? Well yes, except that they advise clients to allocate up to 30% of their accounts to one position. This is a recipe for disaster, because every strategy will have the occasional losing months. Meet Thom, a new member to Option Partners. He joined up just this week, and has allocated 30% of his $10,000 account to one of their trades. Fast forward to September expiration, and oh, it looks like this was one of those rare but unfortunate losing months. Now poor Thom only has $7,000, and because this company seems to prefer high-risk/low-reward iron condors averaging around $600 profit, it will take Thom at least 5 months just to get back to a breakeven point. That’s why we suggest a 5-10% absolute maximum allocation for any one position, and that’s also why we pursue trades that have a better risk/reward ratio.

Reasonable Price - Fail

Their iron condor service costs USD $1089. That’s cheaper than us! But they only offer an annual membership, so you don’t get to try the service out first to see whether it’s a good fit. More importantly, you’re paying them $90/month for one measly trade, at most (9-12 trades per year means there may be up to three months with no positions at all). Heck, if we charged $90 per trade alert, we’d have to ask for $270-$450 per month! Seriously, the reason we enter 3-5 positions per month is to diversify our risk, and to capture divergence in the correlation of different indexes. These guys only trade options on the OEX, so you’re stuck with the action of that one index. Bad value for money, in our opinion.

And seriously, what’s with selling real estate seminar junk, weight loss junk, and coaching advice along with stock picks and options trades? [link]  It’s no wonder this industry has a bad name.  We say this every week, but we really do feel kind of greasy and slimy just for delving into the world of options newsletters every week.  We hope you don’t associate us with our reprobate peers.