At The Close by John A. Sarkett
Here’s a turbocharged option strategy.
Francisco Antonio Urrutia, a former banker with a penchant for a single index option and risk management, has been generating stupendous returns for the past three years. In this niche of option exotica — several thousand individuals exclusively trading the Russell 2000 (Rut) condor — where 100 condors per month is deemed large and carries a $100,000 theoretical risk, he does five or 10 times that size on a monthly basis, and profitably. Spread across 10 different accounts, he has averaged 10% to 15% monthly returns against reg-T margins in fewer than four years. How did he get interested in the rare topic?
“We were living in Celebration [FL], exploring market opportunities, [and] I happened to see an ad on television about an option mentoring seminar,” Urrutia explained. He met Dan Sheridan, founder of Sheridan Options Mentoring (Som). After nearly 25 years as a Mercury Trading market maker specialist in the Cboe pits, Sheridan founded his company in 2007. Now, Som serves an average of 150 students daily via webinar.
Urrutia said that he and his wife started the mentoring program with Sheridan, studying income strategies. They stuck with Sheridan’s rules and followed his advice to stay with one-contract trades. The “rules” include stringent risk management, including predetermined entry points, predetermined max loss, predetermined adjustment points — and nothing by the seat of the pants.
After paper-trading in 2006, Urrutia scaled up, again per the Sheridan method. He moved from paper-trading to trading one contract, and then, after time, 10 contracts. At the end of 2006 he moved to 20s. He stayed with 20s for the first six months of 2007, then moved to 50s. In the third year, he moved up to 100s, eventually to his current 500-contract size. How did he fare in the terrifying markets of 2008? “I was forced to better apply the golden rules, and then I profited more,” he said, adding that when the Dow Jones Industrial Average swings big in a day, there are more profit opportunities, not fewer.