by ERNIE ZERENNER & Michael Phillips, Marketplace Books, Glenelg, Maryland
Our favorite part of
Iron Condor: neutral strategy for uncommon profit was the track record. We are rather partial to track records, not everybody provides one, but they surely should. The authors' track record was somewhat buried in Chapter 6, in fact the thought occurred that this should be moved up to Ch. 1 to command the reader’s attention and diligence going forward. It cites results from 2005 to 2009, as follows:
- Meridian 2-4% max expected profit per month, yearly performance: 85% 41% 13% 29% 43%
- Optimum 6-8% max expected profit per month, yearly performance: 79% 81% 45% 53% 107%
Otherwise, a rather general book, with a few good nuggets strewn throughout, that seems more an introduction to the author’s newsletters than hard-core instruction.
On page 3, the authors begin as follows: “A significant amount of stock option literature tends to focus heavily on the Greeks; Delta, Gamma, Vega, Theta, etc. The Greek-related material proffered by many financial authors sounds sophisticated and intelligent, but in reality, an average reader is often left confused and bewildered by the material presented. In this book, discussions related to the “Greeks” will be avoided in order to offer practical information that any reader can understand.”
Not only are Greeks not employed, neither are formulas for things the authors use like “probability of success.” We were concerned; it's a bit like your pilot saying right before take off, I dispense with all this instrumentation, I prefer to fly 'visual only.' Still, somewhat hesitantly, knowing better, we boarded the flight.
We knew full well that only anecdotal generalities can follow without these precise mathematical tools, greeks and probabilities. And they do.
The risk management system here is based on a concept of exiting at 1% from the short strike, e.g. If your short put strike is 1100 on the SPX, on the way down, take off the short put credit spread at 1111. This would be nearly 50 delta, compared to other mentors’ teaching about exiting or rolling at 25 delta, so this method is going to generate a lot more short term pain, i.e. paper losses. This is not explained.
While the pace of change in the options industry is fairly staggering, and accelerating, we must point out here that the text is abundant with obsolete information, including options symbology, and commissions (no mention of low rates from firms like OptionsHouse), and capability (there is exactly one mention of thinkorswim, which has emerged, according to most serious options traders, as the tech leader in the options brokerage field, and no discussion of what TOS can do.) The claim, “As of the writing of this book, optionsXpress and tradeMONSTER are known to provide contingent orders based on the price of the underlying equity,” leaves out TOS, and OH. TOS, e.g., has possibly has more capability in contingent orders than anyone, extending to volatilities, technical analysis, bids, asks, marks, etc.
In place of due diligence, we have a generous helping of self-serving direction to the author’s own software: “Investors should carefully investigate and evaluate brokers and third-party option tools, like PowerOptions (theirs), for trading iron condors.” Also: “Investors new to options might also consider an advisory newsletter service, like PowerOptionsApplied (theirs again).” No mention of anyone else, the words “Optionvue,” “Sheridan,” or “mentor” don’t arise here.
Curious that the last chapter mentions double diagonals, and butterflies, but not calendars, one of the easiest, most durable, and commission-light vehicles. Word "calendar" not found in text.
In recent months, many iron condor exponents have lamented the low volatilities that make adjusting (“rolling”) an iron condor position an unprofitable exercise. No discussion of that situation here, sorry to say.
This text is a reminder that the options strategist has to undertake his or her due diligence as much towards the reading matter of which they partake as they do with respect to market positions. There are a couple of things worth considering, but by and large, there is simply not enough here to justify the time or the $19.95 price (discounted on Amazon).
Postscript re track records: here's another track record, this one from the
Options Linebacker service. Every such mentor should have a record.html page or similar, wouldn't you agree?
