Intro
Option Trade Alert uses Condors (usually around 3 or 4 a month) to produce regular monthly income for subscribers. OTA is one of 12 (!) spread systems that we currently have auto-traded in our account by Global Auto Trading. (We find it is good to have a few systems running together so that even if one or two have a total wipe-out that month our account value as a whole will always go up).
Their charge is $99 per month which makes it about average for this kind of service (services such as Trade Greeks, Optionsmart and Option Pundit are a bit more, Spread the Trend, Active Investor Online and Trading Options for Income are about the same and Investimonials favorites: Booking Alpha and Option Alpha are quite a bit less).
Technical things
Of all these systems OTA is a little unique and we like it quite a bit. As with most credit spread systems it 'lies dormant' most months just producing regular profits with the expiry of the hedged short put and call. However on the occasions when the underlying moves outside of the anticipated trading range threatening the short strike OTA takes a unique approach. Most systems will react passively, either waiting for the underlying to move away from the short strike, or else rolling to a new expiry and/or strike and hoping that the underlying price moves away. OTA by contrast takes the more aggressive approach of having a set of contingent orders in place (entered at the time the condor is opened) which will trigger when the short strike is threatened, generally causing an additional, nearer the money call or put to be bought to hedge more closely the threatened strike. This effectively creates a more conservative (narrow) spread, leaving the previous long hedge to act as a single call (or put) option to take advantage of the momentum which first caused the contingent order to trigger. Of course no system is perfect, and recently for example, I saw some 'whiplashing' in our account when a buy order was triggered but then the underlying failed to follow through with any momentum, meaning that the new long contract we had bought lost value rather quickly. The proprietor in fact was unsatisfied with this situation which caused losses in March this year (overflowing to April) and suspended the system for May and June while new trading rules were refined (we were given a refund during the suspension). I am not actually sure what was changed, but the proprietor sent an email claiming that the system will now be more stable and secure going forwards.
Another distinctive is the use of individual company shares rather than ETFs and Indexes. Normally services of this nature prefer to sell Index and ETF options to avoid the risk of a sudden move of the underlying, which can occur with an individual company. However with its contingent orders in place, the system is partially protected from such moves, and can even profit from them. E.g. if a conditional order is triggered creating a more narrow hedge, then the remaining single long call (or put) can be released to run with the underlying's momentum. So that the energy which destroys a conventional spread can in this way be harnessed to produce more profits. Having said that, the system is not fool-proof and will have its losing months (although the losses are in proportion to the winning months and are not the kind of catastrophic losses that will wipe out months of gains - the problem with some other spreads systems.)
One advantage for us with OTA (because we have so many spread systems auto-traded in the one account) is that it avoids the 'crowded' RUT, SPY and other ETFs/Indexes, eliminating the risk of conflicting positions in our account. I guess this is not a factor for most people however.
A fairly unique feature of the system which would appeal to manual traders is that no intra-day orders are necessary (the contingent trigger orders take care of fast market moves). Having said that I personally would prefer intra-day notifications from the provider when conditional orders are hit, rather than the after-market notifications which are more typical.
Profitability Etc
Bottom line: the system is very profitable. Perhaps because of the protective contingent orders, the spreads can be fairly wide, and we see good premiums released most months. We only joined the end of last year. We note however that live fill results are recorded in the track record (our fills at Global are sent in for this purpose) and I have no reason to doubt the track record from before we joined. Having said that I wish the providers would also include the ROI for each month in their track record, perhaps taking a portfolio reporting approach (e.g. like Booking Alpha & Option Pundit) which would make comparative performance a little easier to assess. The down-sides? We would prefer an ROI reporting system as mentioned, and the web site is not as sleek as some (although it is not too bad and open & closed orders are clearly reported). Also there is not a lot of reporting or feedback for the trades. I believe the rational is that the system is designed to make money, not to entertain. And a brief monthly report has now been introduced to the blog. Nevertheless I personally would not mind the occasional update or detailed description of trading outcomes when there is increased activity from the system. And it should be remembered, the system is not perfect, there can be losing months, and time where patience is needed when on occasion the trades move underwater.
Bottom line: it is probably one of the most profitable and stable systems in our collection. Worthy of spread traders' consideration! Greg (
[email protected])
This review is the subjective opinion of an Investimonials member and not of Investimonials LLC
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