Right around the time when I wrote my options selling update a few weeks ago, everyone in the option seller circles talked about the blowup of OptionSellers.com. Option Sellers, LLC was a Tampa, Florida-based Registered Investment Adviser and CTA (Commodity Trading Adviser). They managed money for 290 clients. Considering the minimum investment was $250,000, and most investors likely had more money with them, I surmise they were managing around $150m. On November 15, 2018, they informed their investors that not only was all their money lost, but that clients would likely owe more money. Wow, let that sink in: they lost more than 100%, and clients are left with debts they must cover now! Bad news for the clients who invested all their money with OptionSellers!
A failure of a small obscure adviser probably would have stayed under the radar but the co-founder published a tearful apology video, confessing that all customer accounts were wiped out “by a rogue wave.” The movie was since taken down – probably the lawyers didn’t like the idea of this kind of mea culpa so much – but it’s still available on YouTube. The story went viral (or at least as viral as something as obscure as options trading can go) and was then picked up even by the national news media, including the Wall Street Journal, CNBC, and many others.
Quite intriguingly, their strategy imploded over just a few trading days. And just to be sure, this wasn’t fraud a la Bernie Madoff but investors actually lost their money “fair and square” if there is such a thing. Is this something all option sellers should worry about? Yes, if you are as reckless as Option Sellers. If you had bothered to check what these clowns were doing, it was clear that this debacle was all but unavoidable. Let’s take a look at what they did and the five obvious mistakes that led to the meltdown…
Continue reading “The OptionSellers.com debacle: How to blow up your portfolio in five easy steps”