This is part five in our series, Newsletter and Trading Service Takedowns. We haven’t posted a newsletter takedown since late August, and we wouldn’t want to deprive you for too long!
Our candidate for evaluation is a site called 10PercentPerMonth.com, and this review was requested by a reader. If you have a trading newsletter you’d like us to review, just contact us.
Summary conclusion: this seems to be one of the least distasteful of sites that we’ve seen in awhile, and their basic product - which happens to be an iron condor strategy - is sound. But, as we will explain shortly, there are several reasons why you should think twice before signing up with these people.
Honest marketing - Pass
About the only internet marketing their site does seems to be the ad you see on the left, which shows up in Google and some various investing websites. (We can’t speak to any print or email marketing, since that those ads are harder to find if you’re not already on their mailing list.) If all marketing was this simple and dignified, the world would be a better place. In fact, it says something sad about the state of our society that an ad touting 10% monthly returns on a product actually counts as dignified - if it weren’t for all the slimy hucksters screaming about 3000% gains on their penny stocks (or whatever), a service claiming 10% monthly returns might still count as slightly audacious! We certainly feel audacious when we publish our performance numbers, and we’re in the same boat. So we have no problem whatsoever with their marketing, and how could we? We claim exactly the same thing, largely because a successful iron condor strategy really will average in excess of 10% monthly.
Repeatable returns - Fail
Before assessing the repeatability of their returns, let’s quickly review what this site offers. For $98 per month (after a discounted trial month), you receive one iron condor trade via email. It looks like the site relies on the SPX, and opts for high risk, low reward trades.
In principle, it shouldn’t be a problem to verify the claimed performance touted on their site. But the performance page doesn’t give any information beyond net percentage returns, which isn’t very helpful at all. What we can tell from the sample trade they provide and the basic return profile is that 10PercentPerMonth is using a very wide, very low-credit iron condor as their core strategy. The advantage of this approach is that you get trades with a success rate of 80-90%. But the overwhelming disadvantage of high-probability trades is that they also incur much higher risks: the smaller up-front credit provides less of a safety buffer in the event of a major shift in the underlying, and the larger amount of capital at risk means that losing trades hurt a lot more than they do if you regularly pursue high-reward/medium-probability trades (as we do).
Risk management - Fail
From a risk management perspective, there are several problems with the strategy this site pursues:
- ETFs, not traditional index products, are the way to go. As we’ve explained elsewhere, there are several reasons to avoid SPX, OEX, RUT, etc. when you’re starting out with iron condors: ETFs provide faster fills and tighter spreads, and the closer strike prices allow you to manage risk with more precision. But 10PerceptPerMonth still uses the old school SPX approach - which is fine if you’re a professional floor trader, but isn’t optimal for average joes.
- Only one trade per month is a recipe for disaster. This should need no further explanation.
- As noted above, high risk / low reward trades are not the right way to approach risk management. In this sense, their marketing is actually totally false: iron condors can definitely be “a low risk investment strategy” as claimed in the ad, but not the way these guys trade them.
If 10PercentPerMonth were here, they might say, “fine, but risk management isn’t such a big deal, since we don’t make you pay subscription fees for any losing months.” Honestly, this is a nice gesture, but it’s actually counterproductive: it incentivizes the trader to not worry so much about managing risk and making good trades, because hey, members don’t have to pay for losing months, so everyone should be happy, right? Not quite: in the event of a major loss, subscription fees are probably the last thing on anybody’s mind, and writing off a measly $98 is a poor substitute for the $1000 you just lost due to poor risk management.
Reasonable Price - Fail
This is a simple comparison: 10PercentPerMonth asks for $98 for one trade, with no further support - no adjustments as needed, no timely exits, no nothing. We ask for $139 (or less, for longer term memberships) for three to five trades, with full and fast member support, including trade exits and adjustments as needed, trade analysis, index diversification, and free autotrading.
Our “reasonable price” test is to estimate how much our service would cost if we used the pricing standards of the newsletter we’re taking down. In this case, if we followed the example of 10PercentPerMonth, a monthly subscription to Condor Options should cost $294 - $490 ($98 x 3-5 trades), plus, oh, maybe another $50 for the support and other features? But $344/month is just ridiculous, and so is paying $98 for the comparatively sparse offerings of 10PercentPerMonth.
In short, if you want to learn to trade iron condors, we advise you to look elsewhere.
