I have been doing a little math and this loss just seems impossible to have happened. NG actually opened at the NY 9:30 cash session on Nov 14 at 4.401 down from its early morning high of 4.929. That is .677 above its Friday Close so that would be a loss of $6,770 for a single futures contract that was short at the Friday close.
According to the article in Post #5 of this thread, customer funds totaled 225 million and assume a total customer debit balance of 10% which would make it a 250 million total loss on the trade.
To lose that much in a pure short futures position would require 36,927 contracts. (From Fri close to Wed cash open) Now, these OTM naked calls that were sold at 5 cents would have had a delta somewhere in the range of .05 to .10 so it would take many more calls than futures to equal the 250 million because the call delta has to work itself up to 1.00 so it is not going to go up cent for cent like the futures.
I have never even looked at the NG market before this thread so maybe I am missing something but I don't think so.
Looking at it from the sellers perspective selling an option for 5 cents would net $500 per contract. On 225,000,000 in assets a 3% total return would be 6,750,000 or 13,500 contracts total sold. So if he lost a full 50 cents or $5000 per option the total loss would only be $67,500,000. Huge loss but still in business.
I guess I am so worked up on this because in a prior post I said I looked at this guy many years ago and trusted him and his investment model. I vetted him for a friend and even put my blessing on the investment. At that time minimum was 250K and would have only been 10% of his available investment funds but I am so thankful that he did not do it.
I just do not see how this guy could have lost it all on one freeeking trade when he did not need to. When he sells options with a far out expiration and a far out strike price he has plenty of time to exit before it causes real problems. This catastrophic parabolic move that did not allow his exit procedures to work is pure BS nonsense. He had plenty of time to work it out with the MM.
According to the article in Post #5 of this thread, customer funds totaled 225 million and assume a total customer debit balance of 10% which would make it a 250 million total loss on the trade.
To lose that much in a pure short futures position would require 36,927 contracts. (From Fri close to Wed cash open) Now, these OTM naked calls that were sold at 5 cents would have had a delta somewhere in the range of .05 to .10 so it would take many more calls than futures to equal the 250 million because the call delta has to work itself up to 1.00 so it is not going to go up cent for cent like the futures.
I have never even looked at the NG market before this thread so maybe I am missing something but I don't think so.
Looking at it from the sellers perspective selling an option for 5 cents would net $500 per contract. On 225,000,000 in assets a 3% total return would be 6,750,000 or 13,500 contracts total sold. So if he lost a full 50 cents or $5000 per option the total loss would only be $67,500,000. Huge loss but still in business.
I guess I am so worked up on this because in a prior post I said I looked at this guy many years ago and trusted him and his investment model. I vetted him for a friend and even put my blessing on the investment. At that time minimum was 250K and would have only been 10% of his available investment funds but I am so thankful that he did not do it.
I just do not see how this guy could have lost it all on one freeeking trade when he did not need to. When he sells options with a far out expiration and a far out strike price he has plenty of time to exit before it causes real problems. This catastrophic parabolic move that did not allow his exit procedures to work is pure BS nonsense. He had plenty of time to work it out with the MM.
