Fright of the Condor
Some traders did NOT have a good Christmas – specifically the followers of Captain Condor. There were over a thousand of them, each paying $5,500 annually to access his trades. Collectively, they lost an estimated $50 million in the week before Christmas.
Iron Condors
His strategy was based on iron condors – a well-known, defined risk strategy that’s been around for decades. It relies on the underlying – in this case SPY – staying within a defined range until expiration.
So, with SPY trading at $695 you might:
- Sell a 700 call and buy a 705 call
- Sell a 690 put and buy a 685 put
You would collect the premium up front then hope that SPY stayed in the range 690 – 700
Why did they pay him?
Because he added two new twists. The first was using ODTE (Zero Days to Expiration) options. This gave no time to adjust positions, a form of ‘sudden death’ at the close of trading. The second was using the martingale system, a gambling relic from 18th-century France. The rule is simple: after every loss, double the next bet so that the first win recovers all prior losses plus a unit of profit.
Martingale: derived from 18th-century France, ‘jouga a la martegalo’- literally “to play like a simpleton” – because it was considered an absurd and reckless way to gamble that ignored the reality of hitting a wall –
In the real world, table limits and finite capital make eventual ruin a certainty. But that doesn’t stop people falling for its apparent logic again and again.
Conditional probability
We’ve talked about this in previous blogs – the man who always carried a bomb in his hand luggage because the chances of him getting on a plane with TWO bombs was vanishingly small.
Yes, it’s funny, but people behave as though it is logical. They KNOW that if they have tossed 10 tails in a row they are ‘due’ for a head. They feel they are ‘owed’ it. But that isn’t how probability works.
The Coin Has No Memory
To impute a memory to a coin is just plain silly – it somehow knows that it has just landed on its tail 10 times in a row? Of course not; every toss is independent of the last. And it is the same with the market; it doesn’t know that you have just lost ten times in a row (and wouldn’t care even if it did!) You have to look at each trade as an individual trade.
Ten Losing Trades in a Row
Consider the math: If you start with a $10,000 trade and hit a streak of 10 losses (a 1 in 1,024 chance) your 11th trade must be $10,240,000. To place that trade, you would need over $20 million in total capital just to chase your original $10k profit. Risking $20m to make $10k is not “sophisticated trading”- it’s a mathematical suicide mission.
Remember Amway?
Years ago, a friend of mine joined a pyramid scheme, which relied on them recruiting 10 others who in turn would recruit 10 others and so on. I pointed out that after 10 iterations they would need the whole population of Western Australia (it was way back in the 1990s) to be reps. And a few more would need everyone in Australia and most of the South Pacific . . . etc. Strangely, the information wasn’t welcomed and I wasn’t invited back.
Hope Springs Eternal
Some stats on Amway (yes I was surprised to see it was still around). The earnings of most of their ‘Independent Business Owners’ are dismal:
- The average yearly earnings are $723 a year
- 38% earn nothing at all
And this is before expenses like samples, travel and training! Yet Amway appears to have no shortage of people signing up.
Just like Captain Condor.
Schadenfreude?
I get really angry when people are taken advantage of, and the stock market seems to have more than its fair share of people willing to be taken in.
If traders would just stand back, look at the stats, the probabilities then these horrible situations could be avoided.
Captain Condor
What do I think of Captain Condor? I have read about him, I think he is smart enough to know what he was doing, but sucked people in anyway.
I guess the $5,500,000 each year in subscriptions helped ameliorate his conscience.
To the markets . .
And firstly – it is a short week this week, Martin Luther King day, trading starts again Tuesday.
Last week was a ‘meh’ week – nothing really happened. People are back from holidays (the volumes are average or slightly more, so that means everyone is just sitting on their hands waiting for some direction. Well, it is earnings season again, so expect a bit of volatility.
SPY Charts
A bit of a nothing week. SPY moving sideways, only just above the top bound of the Darvas box. Volume not dropping off. Really, not much to say, just waiting for some action (of the right kind!)
On the long term chart I have adjusted the trend lines to better (I hope) reflect what is gong on. Remember all lines on charts, although they may follow the rules for drawing them always have a subjective bias because the period is selected by the person doing the drawing.
SPYG Charts
Last week I commented that we were getting near the ‘pointy end’ – that we would soon know which way it was going to break – well, we are none the wiser this week. Still at the pointy end.
On the long term chart, it looks like it is breaking out of the channel to the downside.
QQQ Charts
Like SPYG QQQ is still at the pointy end. Volumes slightly above average.
No developments in the long term chart.
VIX Chart (Volatility)
Nothing interesting. (that’s good)
ITMeter
The week ahead . .
The week ahead . .
Earnings started – it seems like you’ve just finished one season when the next starts!
Monday 19 Jan
- NYSE closed (Martin Luther King Jr. Day)
Tuesday 20 Jan
- Earnings: 3M, S. Bancorp, Fastenal (industrials & banks)
Wednesday 21 Jan
- Earnings: Johnson & Johnson, Halliburton, Travelers
Thursday 22 Jan
- Major earnings: Procter & Gamble, Intel, GE, Abbott
- Key data: PCE inflation, GDP revision, personal income & spending
- Weekly jobless claims
Friday 23 Jan
- Earnings: Schlumberger
- Data: Flash PMIs (manufacturing & services), consumer sentiment (final)
Futures
The futures are not open yet as it is still Sunday – see below:
. . and bushfires!
This blog is a day early as tomorrow I was planning to drive from Perth down to Esperance on the south coast. (both shaded on the map) Unfortunately, there are 2 bushfires in the way – one on each of the 2 roads that go to Esperance. There are evacuation orders in the red area (leave immediately), the orange is ‘prepare to leave’ – so it is possible that I won’t be able to get through. However, that is tomorrow – things may change. I’m going to try anyway.
Fingers crossed for a good week!
Heather
Trade the tide – not the waves
13 Responses
Dear Heather,
I would like to mention that some newcomers to the In The Money method may experience some losses if they open their positions in early 2026 when SPY was at the peak of 695. However, the In The Money method by Heather Cullen requires patience and perseverance. Personally, I experienced some losses when the stock market crashed in April 2025 to $13k but I sticked with the rules of ITM and my account bounced back to $20k in January 2026. We need to be patient and follow the rules of ITM Method.
Thank you George Henry!
Hi Heather!
The action plan for getting poked by the “pointy end” for spyg would be what? Am I to wait on the 200 day SMA before evacuation?
HI Steve,
no action as yet, wait for the cross.
I just do the chart reading as commentary about what is going on, not as advice to take action. When we are approaching a death cross I will be very clear here – but not there yet.
Hope this helps
h
Dear Heather,
Please stay safe during the fires. I live in Los Angeles and recently we have had major fires in Pacific Palisades and Eaton Canyon. You are a patient and prudent investor like Warren Buffett and Charles Munger of Berkshire Hathaway.
Hey George Henry – thank you – and all safe. the roads were reopened by the time I got there – lots of smoke, but no fire!
Esperance is beautiful, the white sand beaches just amazing colors – but a trifle chilly!
x
h
Dear Heather,
Please stay safe from the fires. I live in Los Angeles and we had a few major fires in early 2025 in Pacific Palisades and Eaton Canyon.
Stay safe Heather. The rule here, for flooded areas, is “turn around, don’t drown.” Unfortunately, too many ignore that.
Hello Heather,
Thank you for pointing out the traps and cautions that lie in our way as we navigate the Markets. Yes, there is a sucker born every day, but there is also a predator who lives to “Take Your Money” born every day, and they scare me. I have been reading your books for years, and they are some of the Few that really impress me! Reading your Blogs and getting to know you better shows me that YOU are an extremely trustworthy and sincere person, one who has earned our trust.
Please never stop!
As you have said in the past, let the market tell you what it is doing, don’t try to tell it… The charts do not lie. Thank You for all you do here…
THANKS and good luck with the driving, hopefully the fires are out. The seasonal timing is the opposite in Canada now. It’s winter, the summer fires are half a year away. Cheers!
Hey Blake – thank you – just been on the bushfire website and it looks as though the Corrigin / Hyden way may be the best bet.
Will check in the morning before I set off.
Canada? Snow season?
Sounds like fun !
x
h
There is a sucker born every minute. Keep up the good work.
Hey Philip – I read a bit about that phrase – commonly attributed to P.T.Barnum – I think it actually was ‘there’s a customer born every minute’.
BUT – you are more accurate – I mean, Martingale????
Seriously??
However, I am sorry, they must have had an awful Chtristmas.
x
h