Optionsellers.com goes bust and the apology video is painful to watch

Two elements compose the risk: move of the price * leverage

1% move up with 100 leverage being short equals wipe out;
25% move up with 4 leverage being short equals wipe out too.
 
PJB1994 said:
I know! Who the hell made that law? Makes zero sense as I agree that futures are far risker than stocks and when paired with options, seems even more risky. I think I'm basically screwed. The losses are likely in the hundreds of millions (290 clients with minimum $500k to $10 million each all wiped out PLUS the damn debit balances). It's bad enough that the money from the accounts is gone, but having to pay a debit balance is excruciating. OptionSellers is a small shop with just a handful of traders so I honestly don't know how much they have. The severity of this guy's screw up is stunning.
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It won't hurt to consult your attorney. It is quite possible that the SEC might find violations of securities laws as far as the actions of the broker. The bad thing which might absolve the broker is the POA which you executed allowing Optionseller.com to trade your account. Now, the broker can say that you gave authority to Optionseller.com to act in your behalf and they are not liable for Optionseller.com's trade decisions. The broker might be inclined to throw you a bone if there is a threat of a lawsuit, the outcome of which is uncertain. If you can get even part of the debit balance waived, it might not be much but, better than nothing!
 
JSOP said:
Both accounts are with FC Stone? Does FC Stone offer IRA accounts? If yes, why did he set up your IRA account through Midland then? He could've set up the IRA account directly with FC Stone if FC Stone is going to be the one ultimately providing you the leverage. Did he want to get "finders' fee" from Midland? Weird.

Glad I was of any help to you. Hope you recover your funds soon!
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I need to research further how the Midland account relates to the second FC Stone one. I don’t think FC Stone has self-directed IRA’s so that was why we had to set up a Midland account. We are calling Midland and FC Stone today for clarification.
 
From Reddit:

longboarder12

there's a guy on twitter that posted a google doc of their positions. basically the main nat gas position was a ton of 12:1 call ratios and some short puts as well. when vol shot up over 11/8-9, even though the short calls remained otm their value got jacked way up. the hedge was the 1 long call for every 12 short...no delta hedging with the future from what i can tell, and even if there was i'm not sure how much it would've helped


docs.google.com/spreadsheets/d/1-oj5UkqU0tMHrMnIEiuIYmTlxVWoU-VJqumykJ3IMUA/edit#gid=1356201715
 
Hi PJB1994,

What was the official name for their CTA program? And another question? Typically CTA managed accounts get daily statements with all current positions. Were you getting them?

Thanks,
redduke
 
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Abundance Magnet said:
ouch!!! Feel for the clients in this one. As a learning trader, I feel there is lots to learn from this experience.

Q... why couldn't the hedge fund hedge the position? I understand they were naked premium sellers. Couldn't they convert their naked put to short strangle? Or close the position, or buy calls... I don't follow the crude or NG market but it looked like while the move was strong, it wasn't an instantaneous or one day affair.

Similarly, would going in as an iron condor or a similar multi-leg strategy have helped their position? Or were the spreads too wide for that strategy to make sense after the market started to move?

thank you for your feedback!
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He can’t take the position because the margin is Huge.
 
MACD said:
Sweet Bobby, Thanks for this post. I have not been on Elite lately. And popped in today to see what maybe of value. Your post was on the top of the list and proved to be a real gem. I am an option seller and manage money for clients as well. Not sure why Mr. Cordier experienced the
"catastrophic loss" but usually this is caused by lack of proper reserves and allocation strategies. Mr.Cordier is a highly respected author and money manager so this makes it all the more interesting and perhaps frightening -- particularly to traders without much experience in hedging futures and options trades.

I attempted to research what "caused" the closure of Mr. Cordier's Hedge Fund. But could not find any current information. His website is basically closed, with just a splash screen providing contact info. Google searches were not of any real help either. Perhaps someone on this thread may know more but I can only speculate what really happened.
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“Highly Respected “ not any more
 
LacesOut said:
Probably accurate.
He could have bailed the position at a big loss or he could continue to chase the dragon.
He chose the latter.
Now he has a big watch.
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First he would have to meet a huge margin call. Then with a massive short natty futures position he’d have to post massive margin. I’m not probably right I’m definitely right; it’s the definition of a margin call. Amaranth, Neuderhoffer, LTCM , MF Global were all massive margin calls that couldn’t be met..
 
Mpeter said:
First he would have to meet a huge margin call. Then with a massive short natty futures position he’d have to post massive margin. I’m not probably right I’m definitely right; it’s the definition of a margin call. Amaranth, Neuderhoffer, LTCM , MF Global were all massive margin calls that couldn’t be met..
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Niederhoffer
 
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