Yes, you are correct about this. However, even if we completely remove the November trades, they still would end 2008 almost breakeven, after starting the year with 34% loss and having another 30% loss in October. Having returns of 140-170% per year (compounded) in three "normal" years and small loss in the biggest bear year in the recent history is not so bad I would say. How about Wicked Profits? They have an average return of 50-60% (not-compounded) since 2000. OptionPundit has shorter history (2.5 years) but it's record is even more impressive (almost 500% on invested capital, almost 200% cash adjusted). I tried all three of them, and I can verify that those results are real. Don't they prove that those strategies work?
See a quote in one of my previous posts: "Over a period of four decades, I have spent thousands of hours trying to devise the "perfect" option strategy using both puts and calls, a strategy that consistently made money in both up and down markets, one which would never give me a single sleepless night. I am absolutely convinced that the perfect option strategy just doesn't exist." I think this is the key. I'm not saying that this strategy is perfect and it will make money every month. All I'm saying that in my opinion, this strategy has higher probability of success and with proper money management, even less long term risk. It definetely requires more work, experience and knowledge in order to be successfull. Does it have a chance to lose 30-40% in a single month? Definetely. But didn't some stocks lose even more during October 2008? Yes, I do cherry-pick services. But can you cherry-pick a service that achieved similar results using stock strategies? The best stock service in the last 5 years according to Hulbert is China & Emerging Markets. It's 5 years annual return is around 25%, nothing even close to the numbers those three services achieved.
If you sell naked puts to collect premiums and base your decisions on the premium, itâs a bad idea. If you do it to buy stock you want to own, itâs a good idea. The key is not to sell more contracts than the number of shares you wouldnât mind to own. Actually, if implemented this way, you would probably do better in October 1987 than just owning stocks. Itâs not the strategy that matters; itâs how you use it. Think of the big picture: you are playing the role of insurance company. Arenât insurance companies profitable in the long run? I still havenât got an answer from lindq why iron condors considered directional bets. And I still havenât got any comment about my suggested portfolio allocation and rules. People warn me in general not to do it, but wonât comment on specific numbers.
This reply does a good job of stating why the 60-70% returns you propose for iron condors is a pipe dream.
I completely see your point. Iâm not saying itâs easy. In my case, achieving 14% per month since May 2009 was probably pure luck. However, service like WickedProfits is the proof that it can be done successfully for a long period of time (almost 10 years in this case, with average annual return of 50-60% (not compounded). I already mentioned OptionPundit and 10percentpermonth. There are more: http://www.spreadthetrend.com/TrackRecord.aspx - 12-14% per month since July 2007, only one losing month (11% loss in Jan 08) http://www.cyclespreads.com/perform.htm - about 4% per month since January 2007, no single losing month. http://www.condoroptions.com/index.php/performance/#condors â 30-40% annual return in the last 2 years. http://www.monthlycashthruoptions.com/ReturnOnInvestment.htm - 45-65% annual return since January 2006. http://www.tradingoptionsforincome.com/performance.html - 14% average return per trade since January 2008. All those returns include a crazy year like 2008. All of them have extreme luck or mad skills? Why none of stock picking letters doesnât make that kind of money? Best stock picking newsletters make about 25-30% per year, and 90% (including the best of them) lost about 30-40% in 2008.