Condor Revenge
There must have been something in the water towards the end of the year. Venezuela moved center stage in the geopolitical uncertainty contest, silver got incredibly volatile with multiple trading days swinging +/- 7%, and the S&P continued to make new all-time highs. Instability and uncertainty continued right into 2026 and show no sign of abating anytime soon.
Another event occurred on Christmas Eve that didn’t get much attention in the mainstream press. “Captain Condor” and about 1000 of his investors/acolytes blew up to the tune of a reported $50 million, not to mention the amount allegedly suffered by those who were following his trading system (for the bargain price of $5,500/year). Many were reported to have lost their life savings. On Christmas day, the Captain addressed the loss on X: “In a nutshell, yes we are hurt but I don’t f-ing give up. We will regroup and try again.” Merry Christmas!
For those who actively trade options, and follow related social media, Captain Condor (nee David Chau) is the moniker of a day trader and social media personality who specializes in (you guessed it) iron condors and a gambling strategy from the 18th Century called the Martingale system. The pitch is nothing new and is right out of the playbook to attract small time or novice investors: combine a relatively esoteric instrument with a cool name (iron condors), a super special strategy that is so good that investors could not divulge any details of it (the Martingale system), a hot product (0DTE options), and finish by sprinkling liberally with some quantitative-sounding terms and serious sounding prose (“positive expectancy,” “a probability-based approach”). The attraction must have been irresistible to a certain class of investor.
What was Captain Condor’s strategy? It was similar in a thematic sense to what many Wall St. firms have been pushing for the last several years – produce income and increased returns (“yield enhancement”) through the sale of options. In this case, the strategy revolved around consistently selling super short-dated iron condors. By itself, that’s a pretty common short volatility strategy and nothing really new.
What was new was the application of the Martingale system, which was first mentioned in the memoirs of Casanova regarding his experiences at a gambling casino in 1754. Basically, the system is a methodology that involves doubling up each losing trade (bet) until the final winning trade covers all the previous losses plus the original stake. There are many variants, but that’s the basic idea. If you think about it, it’s basically a giant game of “double or nothing” played over and over again until you either break even or run out of money. That last part – running out of money – is key because this strategy requires almost unlimited capital to work. Applied to trading, it also requires mean-reversion, i.e., the market will eventually revert to the mean; tomorrow’s prices will usually turn out to be very similar to today’s. In equity, both are debatable propositions, to say the least.
If you feel like your common sense has been assaulted, you’re right. First, almost no one has access to unlimited capital, much less to risk it all just to wind up breaking even. Second, transaction costs are real, which only increases the amount required. But no matter – you will probably hit your brokerage limit way before that becomes a factor. And third, mean-reversion can be an agonizing slow process and can take a lot longer than bankruptcy.
After the collapse, Chau dabbled in understatement: “I do feel guilty for what occurred, but at the same time feel optimistic that there is room for improvement.” Separately, he went on to state “I use a probability-based approach and although I understood this as a possible outcome, this issue did not exist for the specific model over the last three years.” In my trading career, I have lived through several 1 in 10,000 events that could “never” happen. But they did. And there’s the rub: probability-based trading systems are only as good as the methodology that goes into them. If you miscalculate the odds, then you are really just relying on luck. Eventually, a low probability event will occur and cause catastrophic losses. In the case of Captain Condor, it took a few years. “I already identified what had occurred and I’m actively patching and updating the model.” Frankly, after all the potential litigation that is certain to follow, I doubt he will get the chance.
Throughout my career, I have been more or less continuously bombarded with people hawking all sorts of ways to consistently beat the market. Special systems, special products, special trading techniques…you name it, someone has tried to sell it to me. I used to get them in the mail to the tune of several per week; now I just get bombarded with spam. My standard and unoriginal comment regarding these is always the same: if the technique is so special, why are you selling it to me? Why don’t you just trade and make a fortune? No one to date has been able to answer that to my satisfaction, and probably never will.
Steve Ganz, a fellow contributor to OptionStrat, will discuss his take on Captain Condor in his next video. Please watch!