One more Six sigma event after one this February when inverse VIX ETF blew up.
“Stocks are great, until they aren’t,” proclaims the now ‘dark’ website of Tampa-based OptionsSellers.com, explaining to ‘high net worth investors’ that “options are better but most make the mistake of buying them.”
Here’s a selection of blog posts you would have been presented with as a client of optionsellers.com
Sleep at Night Risk Management for Option Sellers
5 Rules for Surviving the Next 4 Years
Avoiding the Big Hit When Selling Options
The 2 Key Criteria You Must Use to Measure Diversification
Beyond these kinds of blog posts, you will see all sorts of allusions to Talebian concepts as well, like this one which suggests that selling deep out-of-the-money options is how to prepare for black swan events. If you are ever feeling guilty about your behavior, force yourself to read this again and again as punishment until you feel like the universe is in balance again.
Process and method words abound on the website’s materials, because they must. Lip service to the value of diversification and conservatism are everywhere, too, as are attempts to sell against the unpredictable volatility of equity markets. Because you can’t sell anything without this language in 2018, especially a risky strategy that is willing to bet the farm on huge exposure to notoriously idiosyncratic markets like natural gas. All of those blogs, all of that garbage about deep out-of-the-money options and black swans – is a cartoon of process. It’s a Nice Sweater.
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.
“I am writing to give you an update on the situation here with your account.
We have spent the week unwinding our short natural gas call position as expediently as possible.
Today which was to be the final day of liquidation, the market flared as prices appear to have been caught in a “short squeeze.”
The speed at which it took place is truly beyond anything I have seen in my career. It overran our risk control systems and left us at the mercy of the market.
In short, it was a rogue wave and it overwhelmed us. Unfortunately, this has resulted in a catastrophic loss.
Our clearing firm, FC Stone now requires us to liquidate all positions. We hoped to have this done today. If not, it will be completed tomorrow.
Your account could potentially be facing a debit balance as of tomorrow. OptionSellers.com will be processing fee credits over the course of the coming days to help alleviate debit balances. What these will be will be determined after all positions are cleared.
This has in effect, crippled the firm. At this point, our brokers at FC Stone have been assisting us in liquidation.
Our offices will remain open and we will all still be here to answer your questions and process account closings. We will do everything in our power to ease what discomfort we can.
I am truly sorry this has happened.
I will be updating you again via memo in 24 hours.”
Regards,
OptionSellers.com
Brilliant! Makes one think and wonder.
In the olden days Shylock would lend only his own money, not borrowed, never a derivative. He still lost money, but only in court. Today, it is all about taking positions with other’s money be it commercial papers or asset management or NBFC lending.