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

sle said:
Thanks!


Dude, he was short pure vega convexity and dvega/dspot. These things have no delta, very little premium. It's pure crash risk. And he was short that shit in size!
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What??!! Those contracts don't move with the underlying??!! So how are they priced? Just by pure vega? No delta, no theta??!! :wtf: So if they are priced purely by vega, why did he do short strangles? If he had just done one side, just short the calls, this client in the spreadsheet would've just $800K but because he also shorted shorts, the guy lost another $800K for a total of $1 million!!!

OMG!!!! And he thinks they are "very safe investment"??!!! These are more risky than the VIX derivative options!!
 
JSOP said:
What??!! Those contracts don't move with the underlying??!! So how are they priced? Just by pure vega? No delta, no theta??!! :wtf: OMG!!!! And he thinks they are "very safe investment"??!!! These are more risky than the VIX derivative options!!
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No, dude, these things are safe.

To quote my first boss, a veritable source of trading wisdom, "selling tails is like sleeping with strangers - easy and very pleasureful but one morning you will regret it"
 
sle said:
To quote my first boss, a veritable source of trading wisdom:
"selling tails is like sleeping with strangers - easy and very pleasureful but one morning you will regret it"
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Using your analogy, he had a three-some, he slept with 2 strangers cuz he sold tails on both sides and lost his clients double the money. I still don't get why did he short strangles when they are priced purely by vega? He has no understanding of option greeks it looks like.
 
JSOP said:
I still don't get why did he short strangles when they are priced purely by vega? He has no understanding of option greeks it looks like.
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Because it would take an extreme event for these tails to go up in price and extreme events are rare. Like they never happen, ever. More importantly, it's not his money if they blow up and his money if they don't, so it's the right way risk for him.
 
sle said:
Because it would take an extreme event for these tails to go up in price and extreme events are rare. Like they never happen, ever. More importantly, it's not his money if they blow up and his money if they don't, so it's the right way risk for him.
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That's awful!! And he was saying he managed their funds like family. LOL
 
sle said:
No, dude, these things are safe.
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Well these contracts do have delta and theta. That's why he was able to make some money on the short puts albeit on paper. It's just that his contracts are so far OTM and so far away from expiration that the delta and theta are very small, almost zero. So yes in general case, they can withstand some volatility. But when s*** hits the fan and because the time to expiration is so long, then he's screwed cuz he's not hedged (those lone 26 very far OTM calls do not count). He could've still stop-lossed earlier though but I think he was trying to bid his time hoping for a market reversal so he can still make some profit while hoping that his clients "well-collateralized" accounts as FC Stone puts it can endure the margin calls. Just as I thought.

What an a$$!! I guess these spreadsheets are going to be court evidence now.
 
JSOP said:
Well these contracts do have delta and theta. That's why he was able to make some money on the short puts albeit on paper.
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Sure, they have some theta and some vega, but in a fixed tick pricing world that realizes very discretely and kinda irrelevant. In the risk manager error thread, I wrote a whole treatise on how selling the wings is about non-spot greeks becoming the primary drivers of your PnL and how scary that is.
 
"It's much easier to predict where a commodity won't go than to predict where it will go" - James Cordier.

I hope the courts do not turn a blind eye to this. What do you guys think? Does he spin this the right way to the jury? LOL one look at that spread sheet and you can tell he was thinking to himself "Natty will NEVER go to 5". Never say never
 
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