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

[PJB1994]

The latest....

OptionSellers.com Memo to Clients November 19, 2018

As you can imagine, our office has been overwhelmed with phone calls with a myriad of questions. Please understand that our administrative assistants, for the most part, cannot answer most of these questions.

We have a 150 name backlog of calls to return, which we will be returning, over time. This is proving challenging in the short term, given the myriad of other issues now facing the firm. However, for the most updated and efficient communication, we are relying on the memo format.

To that end, OptionSellers.com is composing a Final Summary Report describing, in detail, exactly what happened and how it happened in the portfolios. This report will also be addressing the lingering questions being posed to our administrative staff.

That report should be final and in your hands before the Thanksgiving Break. While we do intend to eventually contact all of our client base via personal phone call, it is likely that these memos and the upcoming final report will answer any and all questions that can or will be covered in a phone call.

In the meantime, to address some of the most common questions now:

1. Will there be some type of fee credit to my account?
While this was our original intention, the debit situation with FC Stone has taken this option off the table. The figure on your account statement today is the FINAL figure for a debit call.

2. How, when and where should I address my debit call?
All debits should be paid directly to FC Stone in the most timely manner possible. Questions on debit calls should be directed to FC Stone at the number on your notice. If you have already paid your debit call then please disregard.

3. How do I pay a debit inside of an IRA account?
We have not been advised how to answer this question and refer you to FC Stone.

4. Is there any type of insurance for this kind of event carried by your firm?
Unfortunately, no. Due to the higher risk nature and leverage in the commodities futures markets, we are unaware of any insurance that covers such investments.

Thank you and we will update you again tomorrow.

Regards,
OptionSellers.com Team

OptionSellers.com
401 East Jackson Street Suite 2310
Tampa, FL 33602 800-346-1949 813-472-5765 (Fax) office@OptionSellers.com

 

[Mpeter]

But what about fills then? How can you guarantee that each account will be able to get fills? And if each can't, one does someone get a better fill? In a fast moving market, the difference in fills can be huge, and some might not even be filled at all.

Absolutely, you are correct. So as an example let’s say the manager is getting Long Crude oil and he buys 500 contracts at $55 (the order was to buy 1000 lots at 49.95 with a 50 limit in this simulation). In this case the clients would get a pro rata allocation. If all 1000 were purchased at different prices allocations should be done on a schedule (my fund would change allocation schedule monthly; alphabetically hi to low for example)

 

[newwurldmn]

But what about fills then? How can you guarantee that each account will be able to get fills? And if each can't, one does someone get a better fill? In a fast moving market, the difference in fills can be huge, and some might not even be filled at all.

You trade one block in the market and then allocate on average prices after the execution.

 

[newwurldmn]

The latest....

OptionSellers.com Memo to Clients November 19, 2018

As you can imagine, our office has been overwhelmed with phone calls with a myriad of questions. Please understand that our administrative assistants, for the most part, cannot answer most of these questions.

We have a 150 name backlog of calls to return, which we will be returning, over time. This is proving challenging in the short term, given the myriad of other issues now facing the firm. However, for the most updated and efficient communication, we are relying on the memo format.

To that end, OptionSellers.com is composing a Final Summary Report describing, in detail, exactly what happened and how it happened in the portfolios. This report will also be addressing the lingering questions being posed to our administrative staff.

That report should be final and in your hands before the Thanksgiving Break. While we do intend to eventually contact all of our client base via personal phone call, it is likely that these memos and the upcoming final report will answer any and all questions that can or will be covered in a phone call.

In the meantime, to address some of the most common questions now:

1. Will there be some type of fee credit to my account?
While this was our original intention, the debit situation with FC Stone has taken this option off the table. The figure on your account statement today is the FINAL figure for a debit call.

2. How, when and where should I address my debit call?
All debits should be paid directly to FC Stone in the most timely manner possible. Questions on debit calls should be directed to FC Stone at the number on your notice. If you have already paid your debit call then please disregard.

3. How do I pay a debit inside of an IRA account?
We have not been advised how to answer this question and refer you to FC Stone.

4. Is there any type of insurance for this kind of event carried by your firm?
Unfortunately, no. Due to the higher risk nature and leverage in the commodities futures markets, we are unaware of any insurance that covers such investments.

Thank you and we will update you again tomorrow.

Regards,
OptionSellers.com Team

OptionSellers.com
401 East Jackson Street Suite 2310
Tampa, FL 33602 800-346-1949 813-472-5765 (Fax) office@OptionSellers.com

I think it’s irresponsible on both him and his clients to even consider letting him do any levered strategy in an IRA.

 

[PJB1994]

But what about fills then? How can you guarantee that each account will be able to get fills? And if each can't, one does someone get a better fill? In a fast moving market, the difference in fills can be huge, and some might not even be filled at all.

All great questions. I have no idea. Definitely something I'll have to research. When we got the "catastrophic" notice on Wednesday, they still had not closed out all the positions. The debit balance nearly tripled from Wednesday to Thursday.

 

[Gotcha]

You trade one block in the market and then allocate on average prices after the execution.

But then how is this in my own personal account? If the options dude has POA over my account, I would want to see the trade in my account, not some average number. If I have to take full responsibility for all these trades in my own account, then my account should have each trade with a clear entry and exit along with the routing number. Not that it matters what I think mind you, but if someone is said to be trading my account and I'm responsible and the broker says its all my fault, then I think what I say should apply.

 

[Mpeter]

I think it’s irresponsible on both him and his clients to even consider letting him do any levered strategy in an IRA.

It’s not irresponsible to have an IRA invested in managed futures in my opinion (not sure what ERISA rules are on this), however what is completely irresponsible was this guys risk control. I’ll research this as details come out but it appears this manager had his clients levered from 50 to 500 to 1, Lehman Bros levels of leverage). Responsible CTAs are typically levered 3-1.

 

[Gotcha]

Absolutely, you are correct. So as an example let’s say the manager is getting Long Crude oil and he buys 500 contracts at $55 (the order was to buy 1000 lots at 49.95 with a 50 limit in this simulation). In this case the clients would get a pro rata allocation. If all 1000 were purchased at different prices allocations should be done on a schedule (my fund would change allocation schedule monthly; alphabetically hi to low for example)

Sounds ok to rotate who is gonna be screwed when you're talking pennies difference, but with the super wide spreads, just cause your name ends with Z shouldn't mean you get fucked by thousands of dollars cause you get the shittiest fill.

 

[PJB1994]

I think it’s irresponsible on both him and his clients to even consider letting him do any levered strategy in an IRA.

Certainly allowing naked calls is utterly irresponsible - I didn't think it was legal, but apparently it is legal to have naked options on futures (although you cannot have naked options on stocks). He told us it was only uneducated people who say risk is unlimited because it can ALWAYS be managed ... right. His book focused on vertical spreads which would have prevented this.

It’s not irresponsible to have an IRA invested in managed futures in my opinion (not sure what ERISA rules are on this), however what is completely irresponsible was this guys risk control. I’ll research this as details come out but it appears this manager had his clients levered from 50 to 500 to 1, Lehman Bros levels of leverage). Responsible CTAs are typically levered 3-1.

The ONLY reason we went with him was because of his total focus on risk control (in conversations, his book, and literature). Most of his clients were looking for MORE safety through diversification - not huge payoffs. He said he NEVER swung for triples or home runs, rather focused on consistent singles. I wasn't breathing down his neck because I trusted he was the "professional" who knew much more than I and would deliver on his promises.

 

[Mpeter]

Sounds ok to rotate who is gonna be screwed when you're talking pennies difference, but with the super wide spreads, just cause your name ends with Z shouldn't mean you get fucked by thousands of dollars cause you get the shittiest fill.

I’d have to agree with you on that point: if manager shorted some options at $2 premium and then another batch at $4 you can’t disadvantage a large percentage of your investors. Id have to look at the specific scenereo. Also one of the investors stated that the manager stayed in the position after sending the notice; very possible he was trading around this position (hoping for lower prices to exit perhaps & to mitigate the loss)