I keep getting ads from those guys, so I decided to give it a try, considering the fact that they have a risk free subscription.
They advertise profits of “…1,100% gains in 15 days, …1,200% gains in 7 days, …2,300% gains in 10 days.” They promise to double your money twice a month.
Let’s analyze some of those profits, beginning with the largest one. 2,300% came from VZ April 29 Call-April 28 Put Debit spread. They call it Debit spread; in fact it’s called a risk reversal. You buy a long call and “finance” it by selling a short put. In this case, the position was purchased for $0.03 per spread and sold for $0.72 per spread for a profit of $0.69 per spread.
Now, based on 2,300% profit calculation, you would think that if you invested $10,000 in this position you would grow your money to $240,000, right? Wrong!!! This calculation completely ignores the margin requirement for the short put of about 20% of the underlying stock value – in our case, about $600. With $10,000, you could buy about 16 spreads, and your profit would be $1,104 (16 spreads * $69 per spread). That’s 11% return on $10,000 investment.
Those types of spreads are about third of their positions, so you can imagine what impact all those fake percentages have on their statistics.
So all those 1,200% and 2,300% gains are in fact only 10-20% return on margin on average, and in terms of growing your account, this is the only thing that matters. About 20-30% of the trades lose 80% or more, very few big real winners.
They also claim that “our string of 12 winning trades handed us average profits of 423%. $1,000 in each of those trades grew into $62,760”
Simple math shows that they calculate the profits based on the average gain multiplied by 12 trades ($1,000*5.23*12). That assumes that only one trade was active at any given time, which is not the case (currently they have 20 open positions). Saying that “$1,000 would grow into $62,760” is extremely misleading and completely dishonest.
Bottom line: this service is a complete scam.
This review is the subjective opinion of an Investimonials member and not of Investimonials LLC
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