Naked Sellers Destroyed
CATASTROPHIC LOSS EVENT
On November 15, 2018, OptionSellers.com notified its investors in an email entitled “Catastrophic Loss Event” that it not only lost all their money, but that they would also owe money to Intl FC Stone for margin calls. According to OptionSellers.com, they lost a substantial portion of their investors’ assets due to a short call position in crude oil that, according to Optionsellers.com “was so fast and intense that it overwhelmed all risk measures in place.” It then informed investors that they have a debit balance in their accounts which they need to bring back to zero by paying INTL FC Stone the difference. So, in addition to trying to process the news all their money is gone, they also have INTL FC Stone breathing down their necks demanding they pay the money they owe for its margin calls. This from : https://www.johnschapman.com
So What Does This Mean?
Selling naked is a game of chance played by idiots. It beggars belief that these smug individuals think they are better than everyone else. They felt that they could just sell options. Because buying them is a mug’s game. Yet again hubris destroys wealth. I bitterly resent naked option sellers for their distortion of the market. They lower implied volatility by the facile act of simply selling naked. They destroy proper premiums for decent traders, who manage risk.
We have a valuable lesson here, sadly at the expense of some greedy indolent folk. Good traders do not sell naked. Decent traders do not expose themselves to a margin call. Managers of risk live to fight another day, especially through losses.
What This Fund Manager Failed To Understand
I give you a truly apposite little item, coutresy of John Mauldin. Ray Dalio got smashed to bits by predicting wrongly. This author’s bite size episodes of his presentation make good reading. As a counter to the terrible news of the above disastrous Cordier fund.
https://www.principles.com/principles-for-success/#play
Losses Are Not Funny
I do not gloat at such things, but I wish more people would wake up and see how fragile their ‘investment expert’ is. We manage our own money best, knowing our goals and understanding our personal risk profile. We use a fabulous vehicle, options, which can give us a huge advantage when we trade correctly and honestly. I firmly believe this.
