Time Trader Pro

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Bob Wilber
Bob Wilber
11 years ago

Keith Fitz-Gerald’s Time Trader Pro

You’ve seen the hype:

“Why these Thursdays could be the most profitable three days of your life!

Imagine spending $15 to make $348.34

Or spending $150 to pocket $3,483

Or even $1,500 to rack up a cool $34,834

Well, now you can! Every single month!

Today, I’d like to extend you an invitation for the next wave of ‘windfall’ profits!”

As you’ve probably guessed, Time Trader Pro is an options trading advisory service. Unlike the vast majority of options oriented newsletters TTP does not usually make directional bets on stocks (buy a call if you think it’ll go up, a put if you think it’ll go down). Instead they make plays that bet that stocks or indices will not move outside of a certain range. The typical play is a double diagonal spread like what follows (this is taken from the March newsletter, the trade has come and gone so I’m not giving anything away by showing you this):

Buy 1 SPY June 09 88 Call (SZCFJ)
Buy 1 SPY June 09 69 Put (SWVRQ)
Sell 1 SPY April 09 86 Call (SZCDH)
Sell 1 SPY April 09 70 put (SZCPR)
Limit $3.50 debit

What’s going on? An April strangle is being sold and a June strangle is being bought to hedge it. The money is being made on the time decay of the April options. This works because the short April options decay faster than the long June options do (theta is positive). The options are chosen to make the net position close to delta neutral when it is opened (when SPY goes up the gains on the long June call and short April put are canceled out by the losses on the long June put and the short April call, and vice versa). As it happens, this trade made about 20% in a couple of weeks. What could have gone wrong? Well, the absolute worst case would be if SPY (S&P 500 index ETF) shot up drastically overnight to far above $88. In that case the short call diagonal spread would be fully in the money while the short put diagonal spread would be worthless — a position you bought for $350 per contract would have a value of *negative* $200 per contract. Such a loss is highly unlikely. First, merely getting to $88 early on would not cause the worst case loss because the June call would still have a lot of time value. Second, unlike some individual stocks, indices don’t generally make huge moves in one day, so in practice you’d hit the stop loss and get out well before the worst case occurs. Nonetheless you should be aware that a position you pay a net debit to buy can actually wind up worth less than zero.

The performance: My first trade made 20%, the second stopped out with a 25% loss, and the third made such a tiny profit that it has to be considered a break even trade ($80 gain when several thousand dollars of options were bought and sold). I decided to quit this before the 90 day “get your money back” period is up; it didn’t look like this pricey newsletter would pay for itself.

The pros: You can make trades that make money even if the underlying stock goes nowhere. I’m not aware of any other option service that does this type of option trade.

The cons: If the underlying stock goes somewhere too fast, you’ll wind up stopping out at a loss. You need to have a broker with very low option commissions and one that lets you create a “bag” of options bought at a specified net price. (Interactive Brokers works fine for this, the newsletter recommends Trade Monster. Don’t use TDAmeritrade.) Some of the trades involve buying and selling options of nearly equal value, with the result that the commissions wind up being a substantial part of your net costs. This is particularly annoying because the newsletter ignores commission costs when calculating the “gains”. (In the trade that made me $80 my broker made several times more than I did.) Also, the trades with short and long positions of nearly equal value have huge bid-ask spreads relative to the net cost, e.g., Bid: 0.20, Ask 0.40. Obviously it makes a huge difference to your percentage gains whether you buy at 0.25 or 0.35, but it’s often a matter of luck which price you’ll get filled at. The same issue applies when closing the position. Finally, the “near zero net value” trades are the ones most likely to swing to a negative net value, so they’re the ones that can suffer the largest percentage losses. It’s important to keep that in mind when deciding how big a position to take.

Sometimes you will be told to buy such-and-such a set of options at, say, $3.50, and then the next day the newsletter says “You should have been able to get in at $2.90, so we’ll use that as the base price in calculating our gains.” In other words, if you put in a limit order and got filled at the recommended price, you got screwed. An honest newsletter would always assume that trades are entered at the highest recommended price. But if they all did that, how many would be able to boast about their “windfall profits”?

Of course none of the trades will make you 23 times the money you invested. I doubt that you’re surprised to hear that. As is usual for financial newsletter ads the copywriters let their imaginations run riot.

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SJS
SJS
11 years ago

I stopped this service after 1 month. This guy is all hype, his trades are simply awful. I questioned one of his trades and customer service did not reply because as I saw it, it would’ve never been profitable. They did however, refund my money, hence the extra star I awarded. Do not touch this service with a barge pole unless you want to lose money.

Goldbug
Goldbug
11 years ago

I generally like Keith Fitzgerald but this is not one of his best services. I had gotten this service as a package deal to the lifetime Oxford Club deal fro $8K. I do give him credit for running this double diagonal service though as placing these types of trades is 100 times tougher than placing a simple put or call. Keith does make a great effort in this but I have not profited from this service. His other services the Geiger Index and New China Trader I would highly recommend and follow as they have made me money. Also placing these trades is quite expensive also and is not worth it with all the fees and commissions you must pay for placing 4 options at once.

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Time traveler
Time traveler
10 years ago

Time trader pro is pretty useless in that it fails to make the customer money. It takes too long and eats up very minimal profits (if any) with commissions. Poor performance. Fotunately, they did refund the subscription price.

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