Trade signal services...addendum

I received another offer for an options trading advisory service or signal service.

This guarantee is deceiving. All of the others that I have looked at have had unconditional guarantees, satisfaction of money back in x days. This one states guaranteed 37 winning trades in six months or money back. Well, that sounds OK, 6 trades a month winners?

Reading farther, I find that I have to read the whole thing to get the proper perspective on this, there is no mention of the win vs lose rate, just a 37 winning trade threshold. Later it does state 8 - 10 trades per week.

WHOOA! That's a minimum of 192 trades and up to 240 trades...and he is only going guarantee 37 are winners? What constitutes a winner? 5% return? 50% return...probably anything that is not zero or less by definition.

That is fewer than 1 in 5 winning trades and worse, no guaranteed return rate.

The trades appear to be OTM options so the entire trade is risk. Assume straight odds to keep my math to a minimum, and of every 5 trades 1 wins (losing runs at this rate could easily be much longer than 4 losers in a row) then the minimum return needs to be substantial

Discounting commissions each winning trade would have to net 400% for every single winning trade just to break even. With single contracts the return needs to be higher yet as the commissions have to be covered for the losing trades as well which translates into over 520% rate of return minimum to actually break even.

OUCH!

Other services have quoted that they will return double there cost in a certain period as well as the unconditional guarantee in the first place.

It certainly pays to read and understand what is really being said in any offer.

Jeff.