Here is a copy of my recent letter to The Economist magazine’s Free Exchange column regarding Milton Friedman’s legacy.  As I say in my letter, the Economist article does not touch on an even more important side of Friedman’s impact on policy makers and regulators – that of regulation, and in particular, of Friedman’s blind trust as a libertarian in the private sector.  For investors, this topic takes center stage, because we cannot even go one week these days without hearing about some scandal or fraud in the investment/banking/brokerage industry – and innocent folks are getting hurt.  Indeed, many investors have thrown in the towel – as the glamour, glitz and glory of investing has all but completely vanished, having been over-shadowed by the greed and selfishness of the fat cats of Wall Street and CEOs running away with billions while naive investors are left holding the bag.  No wonder that Occupy Wall Street has a burgeoning base of followers on Main Street.

My basic message to everyone is that libertarianism is dangerous especially when it comes to finance because if you let the fat cats of Wall Street take you down, they can and they will – as we saw with the financial meltdown of 2008.   

Dr. MiltonFriedman, libertarian and monetarist Dr. MiltonFriedman, libertarian and monetarist


Here is the letter that I submitted.  I welcome your feedback.

July 30, 2012

Your article on Friedman’s legacy is highly relevant from the standpoint of his huge impact as a monetarist, but surprisingly does not address what may have been an even bigger economic issue of the “lost decade” – namely, Friedman’s disdain for regulation of not only the economy but of the financial markets – the spirit of which was highlighted in his libertarian book

It is noteworthy that as one of Friedman’s staunchest admirers, Greenspan failed to tighten the regulatory reigns on a reckless, greed-driven industry which contributed to the financial meltdown of 2008. Ironically, a foreshadowing of this crisis occurred with the NY Fed orchestrating a bailout for Long-Term Capital Management (LTCM) in 1998, during Greenspan’s reign as the Fed Board Governor. Even in the wake of this financial earthquake, Greenspan’s ensuing comments amazingly affirmed his almost complete trust in the wisdom of Wall Street, instead of insisting on tighter regulation of the financial industry. As we all have seen over the past five years particularly, the libertarian mentality can be a dangerous one – it completely ignores how self-interest and greed can tear apart the foundations of the global financial system, and in turn, of prosperity. Bankers and speculators simply can not be trusted to act responsibly. So they must be continuously monitored for reckless behavior, much as the CFTC monitors margin balances for futures trading accounts or as the police issues tickets to dangerous drivers who run traffic lights putting pedestrians in danger as they cross an intersection. For a wonderful read of the LTCM fallout and Greenspan’s naivete, please check out Roger Lowenstein’s When Genius Failed: The Rise and Fall of Long-Term Capital Management. This book should be required reading for financial regulators, business school, college and high school graduates.
Richard Wiegand


P.S. Lowenstein’s book may be found on Amazon at






This article is a Consumer Report/Review of Dan Sheridan's mentoring program.  As a matter of disclosure, there are no hidden agendas here – I receive no compensation from Sheridan Mentoring or from any of his competitors (either directly or indirectly) for writing this article.

Dan Sheridan is very entertaining, especially in the world of trading mentoring.  He reminds me of Charlie Sheen from Two and a Half Men, (he even looks a bit like Charlie Sheen), sometimes leading his nephew Jake (read mentoring students), down the road of temptation inadvertently while maintaining a rough and direct edge that is characteristic of experienced former pit traders. As an experienced trader/investor (not to mention that I've taken quite a few courses on trading during my career), I was willing to try out Dan's ideas - which I did during the course - while keeping these trade ideas very small - maintaining a healthy mix of experimentation and skepticism.

I enjoyed every one of Dan's classes much like every trader likes to hang with experienced and successful traders, hearing their carefully chosen words of wisdom. The course itself is is well thought out and it is hands on.  Students get to try out Dan's new options analytic software called OptionNet Explorer during the six weeks of the course at no additional cost.  This software has the look and feel of OptionVue - indeed, Dan was a veteran user of OptionVue for many years - which is a powerful options analytic program.  You can create and back-test all the options strategies under the sun, with first rate visual graphics.


Sheridan_OptionNetExplorer analytics

Like OptionVue, OptionNet Explorer hooks up to real-time data and you can now send your trades directly through to TradeMonster. The back-testing is great when you want to see how a particular strategy or series of adjustments would have fared in the past (you can try them out in up, down, sideways, volatile and quiet markets) by tapping a database of historical options (mid-point) prices that is updated every half hour.  Hypothetical or actual trades can be saved to a trade archive for any number of real or simulated trading accounts.  The historical database is great for traders who want to see how they would have done if they took profits once their target % yield objective has been hit during the trading day at half-hour intervals (as opposed to viewing end-of-day historical performance as is the case with the TOS backtester).

Dan's course jumps right in with a series of theta (income) options trades across the major benchmark stock indices as well as a few actively traded issues like AAPL, GOOG, or IBM.  Your homework is to recreate all these trades in OptionNet Explorer and track them daily - adjusting or closing out positions when specific price or profit target levels are hit.  As the course progresses, you'll begin to notice how trades are supposed to fit together as part of a well-crafted options income portfolio - with specific percentages allocated to market or delta neutral vs. slightly directional as well as to vega positive and vega negative positions.  You also get some exposure to Dan's monster options trade in the Trading the Greeks module of the course - which is a 15-plus legged options beast of a position that somehow you're supposed to manage during the life of the position and then somehow surgically lay to rest as expiration nears.

If all these options concepts sound Greek to you, then I don't think you're ready for any of Dan's courses.  He is much more suited to intermediate and advanced options traders.  (For beginner options courses I would recommend the folks over at OptionVue who run a rigorous curriculum called DiscoverOptions designed for beginners to advanced options trading mentoring).  (There are a number of options courses out there, and perhaps someday I'll get around to reviewing them).

I have not taken any of Dan's advanced mentoring programs (which are one-on-one personal coaching courses where he supposedly helps you get your whole trading game plan together and then makes sure you follow it), so I can't comment on just how successful students are that graduate from it.  But I have heard good things about both Dan's advanced programs as well as DiscoverOptions personal coaching and mentoring programs.  One of the key differences between the folks at DiscoverOptions vs. Sheridan Mentoring is that the former is comprised of a group of successful traders, whereas with the latter, it's essentially Dan.  For those who want a bit more diversity (being able to contrast, compare and multiple trading styles), it's better to go with DiscoverOptions.  Also, keep in mind that these are the guys (Len Yates and Steve Lentz) who designed and developed OptionVue - one of the premier, if not the best options analytical software programs around.

As an example, Dan comes from an options market maker background at the CBOE (Chicago Board Options Exchange).  He is a non-directional ("theta hunter" to use his own words) type of trader.  In the first week of class he asks every student to leave their directional biases at the door.  So the assumption and focus is on time decay (theta) - not on having a view of which way the market is going.  Indeed, since markets rarely sit inside of pre-determined trading ranges (what every theta trader salivates over), the key to success is knowing when and how to adjust the painful sides or legs of option spread trades.  If you don't adjust as an options trader you'll get killed.  Dan's responsibility to his students is to make sure everyone knows how to do a half-way decent job adjusting - otherwise he's just like Charlie Sheen leading his nephew Jake down the wayward path.  But as I try to explain in one of my previous articles on option income trading , I personally prefer to take a directional view -because I've spent many years developing what I believe to be a viable directional model for the equity benchmarks.  Bottom line, if you have a solid directional model, use it.  If so, why bother with market neutral theta hunting, or options at all for that matter?  (You can and should use leveraged ETFs or futures instead of options if you follow a directional model due to the much higher commission and slippage costs associated with options - not mention potential margin difficulties that options spread traders encounter when un-winding a 15-plus legged beast of an options position).  Don't believe me, try out one of these Frankenstein positions for yourself sometime - only please remember to keep each leg as small as possible.  And try not to snicker every time you have to your adjustment levels are hit.  (I did exactly that as I tried out one of Dan's monster Managing the Greeks trades).  At DiscoverOptions, you'll get a more of a directional palette than at Sheridan mentoring as well as an appreciation for simplicity - because in this business, often the simplest approach is best.

A Brief Bio of Dan Sheridan

Sheridan was an options market maker at the CBOE for over 20 years and traded equity options for a hedge fund called Mercury Trading along with Jon Najarian and racked up a few years of stellar returns, employing market neutral theta options income trading strategies and taking advantage of much wider option bid-ask spreads than is prevalent today.  In The Art of Income Trading, one of Sheridan's mentoring programs, he conceded to his students that Mercury Trading closed down when penny-wide bid-ask spreads entered the scene and the hedge fund had lost its edge.  This prompts the question as to whether the stellar returns from Mercury Trading were more from expert market making skills than from the implementation of the income option strategies taught in his course. Why close down a successful hedge fund if these options strategies are supposed to work?  Aren't the 6-8% per month target returns that his course says are do-able for intermediate to advanced options traders sufficient to keep hedge fund investors happy?  Why not keep Mercury Trading going instead of running an options mentoring program?

My best guess as to why Sheridan has chosen the tutorial path instead of continue to trade for Najarian may be that Sheridan and Najarian have always hedged their bets with commission or slippage via the brokerage community in some way. This is what truly gave them an edge - along with the occasional explosive spec trade (e.g. time bomb butterflies or otm calls/puts during earnings season - strategies that have very little if anything to do with option income trading and more with direction).  Both Sheridan and Najarian trade for their own personal accounts - so they put their money where their mouth is - however, both are affiliated with brokerage firms either directly or indirectly (TradeMonster, ThinkOrSwim or TOS as the latter brokerage firm is referred to as).  In fact, Sheridan's brother at one point was one of the directors at TOS - I don't know whether he still is after TD Bank bought out Tom Sosnoff's options brokerage firm.

The point is that the benefits of running a diverse portfolio of options income spread trades appear to me to be more in line with brokerage firm's bottom lines than with those of individual investors. That's because options spread trades are multi-legged and span a wide range of strikes and expiration months - which brokers absolutely love because it means a higher number of trades, meatier bid-ask spreads at the wings, and greater liquidity for all.  While it is certainly possible to make money with Dan's option income trading approach - only a select few of his students will be successful over the long haul.  My best guess is that around 5-10% of his students actually average 4-6% per month after at least one year of breaking even, 50% of his students break-even after a year of trading and then give up, and the remaining 45% or so lose money consistently and then give up.  (While this data is not readily available, it is based on the feedback that I get from other students taking the course, their skill level and experience trading, as well as my own experience trading and back-testing the viability of these strategies).

Don't let the lure of 4-6% monthly returns fool you.  In reality, they are likely to be even lower not only due to the cost of slippage and commissions but also because of the fact that you can only commit 50-75% of your equity to options trades  (due to the cash levels that you must have on hand in order to adjust positions as well as to the much higher risk of ruin due to the leverage effect of options).  That's perhaps the subject of another article sometime.  For now, the message here is the same message that I give in my previous article on options income trading - caveat emptor - let the buyer beware.




I begin my brokerage firm consumer report/review with Fidelity Investments, accessible at

Fidelity Investments Office Image

Fidelity Investments

It is a brokerage firm that I have used for many years for myself and for my clients because it is truly a well-run private company and the customer service has been excellent.  As a matter of disclosure, there are no hidden agendas here - I receive no compensation from Fidelity (either directly or indirectly) for writing this article.


If you're an active trader (>120+ trades per year) and trade size (over 2000 shares at a time), Fidelity is tough to beat with $7.95 commissions per trade, unlimited size.

Plus with the Active Trader program you get access to a host of analytical tools like Wealth-Lab Pro, where you can back-test virtually any directional strategy using technical and fundamental variables.  The Options Analytical software is also quite powerful, although for serious and experienced options traders I believe that OptionVue and ThinkOrSwim (now owned by TD Bank) is better.  However, if you've read one of the ProActInvest articles on options trading, I strongly believe that most investors should stay away from these leveraged beasts for the most part.  Leave options trading to the pros, because that's who you're up against.

If you're an ETF sector and/or asset class rotation trader, Fidelity offers commission free trades inside a universe of 30 iShares ETFs (17 S Equity style box and benchmark ETFs, 6 international equity ETFs, 6 fixed income or bond ETFs, and 1 REIT ETF).  This is great for traders and tactical investors with market timing skills or those who subscribe to a competitive market timing signal service.  Along these lines, you may be interested in one of the timing models offered by

For less active traders, Fidelity may not be the place for you - you'll be better off trading at Interactive Brokers until you hit the 2,000 share mark, at which point you're probably more of an active trader anyway and then the Fidelity Active Trader program is where you want to be.

For strategic asset allocation investors ("set it and forget it" type investors), you'll get as-reasonable-as-it-gets commission rates for mutual fund trades even though you're paying $75 per trade for online executions.  ETF trades fall into the stock trades category, where you'll pay $7.95 for online trades.  That's pretty reasonable. Compare Fidelity's rates with Chuck Schwab for example and you'll be glad you read this article, because ironically, while Schwab was the pioneer of discount brokerage firm, it really can't compete with Fidelity or ScottTrade in this department.

Individual bond trades are about as low as you can get in the business - US Treasury bonds and TIPs are free and corporates-agencies-municipals are $1/bond.  So if you bought $10,000 of IBM 5 year corporates, you'd pay $10 for the transaction (typically bonds trade in $1,000 increments).  By the way, the bond analytics are excellent if you're the type of investor who likes to cherry pick your bonds - which I strongly discourage for most investors - you're much better off going with a solid bond fund ETF or managed bond mutual fund like JAFIX or LSBRX that diversifies across hundreds of individual bond issues, for example.  I only suggest considering individual bonds for high net worth investors who need municipal issues to reduce their tax burden.

Trade Execution Efficiency

I can't complain about the fills that I've gotten at Fidelity.  They've been pretty much in line with the bid-ask spreads.  But then again, I trade mostly liquid ETFs.  For mutual funds, this is not really an issue because investors typically get in and out at the NAV (net asset value of the fund which is calculated around 4 PM each day).  Investors should not trade mutual funds because of the high cost of commissions involved as well as early redemption penalties.  (The exception to this would be a fund family program like Rydex or ProFunds that allows commission free unlimited fund rotation - which assumes that you have incredible market timing skills).  Remember, a high frequency turnover rate is more likely to hurt rather than help investors - for most if not all investors, it's much better to get the asset allocation right, set it and forget it, rebalance once per year, and stick with the program.  Warren Buffett did not get rich by day-trading his stock portfolio.

Research and Analytics

As mentioned above, Wealth-Lab Pro and Options Analytics are very useful for active traders.  But Fidelity also has among the best research for traditional investors as well who think long-term.  I consider Fidelity's mutual fund, stock, ETF and bond analytics to be on a par with  - I use the two inter-changeably quite a bit for my investment research.  What I like about Fidelity and Morningstar research is that they are both objective - there are no hidden agendas favoring certain fund families or investment styles over another.  Very comprehensive and insightful as well.  I have used Fidelity's web site interactively with students in classroom situations with great success.  My students loved both the Fidelity and the Morningstar web sites.


Range of Products Available

Fidelity takes a Target or Wal-Mart approach to offering investment products to customers and financial advisors.  Fidelity offers virtually any mutual fund on its Retail Funds network (from virtually all the big and smaller fund families), much like ScottTrade.  If a mutual fund is not available through the Reatail Funds network, it's probably too esoteric for most investors.  While Vanguard is also a reputable brokerage firm, they simply don't have as wide a selection of mutual funds as Fidelity or ScottTrade. Vanguard tends to focus on promoting its own low management fee index funds.

Fidelity also offers some of the lowest commission rates for annuities - in all the various shapes and sizes (index, fixed, immediate, variable, variable tax deferred, etc.)  This is relevant for high net worth investors and retirees especially.


This is one of the areas where Fidelity shines.  Around tax time when I have to generate a 1099-B for clients and for myself, I can count on Fidelity mailing (and e-mailing) me a copy a week or two after January 1st.  Sometimes getting your tax statements on time for tax season can be an issue with the other brokerage firms.  When I used to have accounts at Vanguard, the tax reporting was less than stellar.  I remember getting stumped on a cost basis issue one time at Vanguard.  This has never happened to me at Fidelity, where the tax, trading and fund flow activity and performance reporting is first rate.  And, most of these reports are available online and can be exported to an Excel spreadsheet if necessary.  One minor area that can be improved is the performance analytics report - at the moment it is updated once per month - it would be great if Fidelity would update this once per week (or even daily) if possible.  The performance analytics report is not to be confused with the account positions table/statement -which is updated in real-time for stocks/ETFs and once per day for mutual funds.

Customer Service

Again, of all the brokerage firms that I have dealt with, Fidelity has given me the best customer service.  Representatives are tight on privacy/security, professional and courteous.  Advanced investing concepts and questions are dealt with by experienced traders, market makers and advisors if necessary for the professional client services accounts (usually clients and advisors with somewhat larger sized accounts). Dealing with fund transfers is a breeze - you can even sign up for an automatic funds transfer for dividend payments from selected mutual funds on a weekly or monthly basis into your personal checking account, which is a nice feature for retirees who depend on interest income for their daily expenses.

In addition, there's always a local branch representative available to help you set up and fund new accounts or to answer investment questions that you have.

Bottom Line

For competitive commission rates, great customer service and excellent reporting you really can't beat Fidelity.  I highly recommend this firm among all the brokerage firms out there, and would buy the stock if it were trading publicly.  But thank God Fidelity is still a private firm.  I have a feeling that if it were publicly traded, much of its shine and sparkle would become jaded.  Fidelity gets two thumbs up from


Rich Wiegand


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