Humble

The cost of the option is $5, the real dollar cost is $500. It is $500 premium in real dollar terms, but the options price of $5 is really low, considering it is a $1,200+ instrument. This is a true definition of "collecting pennies and risking thousands".

Correct. So lets say he had a 100k account and was aiming for 25-30% gains annually. To get there (30k), he had to sell around 25 1100 puts, giving him exposure to over $3M gold futures on 100k account.

No he was not lying He was referring to Aug2019 futures. He is a screenshot from ONE: Here is the problem: Margin one contract is around $3,500, and you control $122,000 worth of gold. That's 1:34 leverage. So $500 premium represents 14% return on margin in 10 months, but it is using 1:34 leverage. This is exactly what happened with his /NG contracts. He didn't think NG will increase by 40% in just few days - but it did. Who says it cannot happened to gold?

I'm not an expert in legal matters, and Chris can probably can share more insights, but I believe it was a classic case of misrepresentation. When you market a highly speculative find as a retirement strategy and put your clients IRAs into this strategy, this is definitely a misrepresentation. They will probably claim that OptionSellers.com negligently engaged in a risky trading strategy that was unsuitable for its clients and breached its fiduciary duties to them by putting its interests ahead of its clients.

This whole discussion about rules and regulations is very interesting, but it is also a bit academic. The fact is that somehow this guy found a way around those rules and regulations. And Chris, I completely agree with you - it is really frustrating to see so many people in this industry ignoring the rules, which makes a bad name for the whole industry. Selling options is the easiest thing to do from marketing point of view. You can do it for years, and get very good results - but inevitable eventually happens. Except for many funds like Karen Supertrader, LJM fund etc. many of us still remember those trading services who went with good record for years before blowing their clients accounts (Booking Alpha, Wicked Options, Spread the Trend, Avant Options, Bullogic and many others). Since most of them are anonymous and you don't know the people behind the service, they just close and re open under a different name. Unfortunately, their clients cannot just reboot their accounts. Some of them remain open and just put on their performance page something like: We all know what does it mean. Speaking of regulations - SEC considers newsletters that engage in auto-trading to be investment advisers. So most newsletters that engage in auto-trading are breaking the law, but somehow they get away with it for years. Now, it has been mentioned many times that this guy hedged his oil exposure with natural gas, assuming they usually move together. However, since he used naked options, the risk/reward is not symmetrical. He sold naked calls on NG and naked puts on oil for a small premium. Even if both moved higher, he would make small gains on oil naked puts (keeping the premium), but still lose a fortune on NG naked calls. How this is a hedge is beyond me.

James Cordier: Another Options Selling Fund Goes Bust

As many of you know, it has been a difficult period for me and my family. My wife had a second stroke last month and had to do a brain surgery last week to remove a brain stem cavernoma. I'm glad to report that the surgery went well, and she is now recovering in rehab. It is still a long process, but the most difficult and risky part is behind us. I would like to thank everyone for your support and good wishes! I'm very fortunate to have such great community, both on professional and personal level. The number of emails and messages was really overwhelming. Special thanks to our dedicated team of mentors (@Yowster @SBatch and others) for covering during my absence. I expect to be back in full force shortly and to continue providing the same level of support and service you are all used to. Happy Thanksgiving and happy trading during those challenging times!

@Crazy ayzogreat results, thanks for posting!

Niederhoffer, Karen Supertrader, LJM fund.. there are probably many others less famous. Naked options by themselves are not necessarily a bad thing. The problem is leverage and position sizing. If implemented correctly, naked options can probably make money in the long term. But if you overleverage, you just cannot recover from the inevitable occasional losses.

Why do options writer have better chance of earning

One word: LEVERAGE. If you read James Cordier's Seeking Alpha article Option Selling Opportunities So Good They're Scary, he explains how little margin you need to put those positions. So he applies an extreme margin to already leveraged instrument, without any hedging, and then is surprised he is wiped out. The article title implies that those strategies are almost free money. And then there is no mentioning of risks at all. ZERO. Anyone who was reading the article could see this coming. The writing was on the wall. So no, I don't feel sorry for him at all. And I don't feel sorry for his clients - they could see find all the lawsuits against him with simple Google search.

I believe ONE also provides some or most of the features uou mentioned.

Even with no exercise fee, this strategy will still produce similar returns as just buying the stock. The P/L chart is the same.

The strategy is called Synthetic Long Stock. The P/L is basically identical to buying a stock, but allows you more leverage. The position moves dollar to dollar with the stock. Since you are buying 34.5 strikes and the stock is below 33 now, if you exercise the call, you are basically buying the stock at 34.5 (the strike price), which is higher than the current stock price, so this is where you will be losing money, and this loss will offset you gain from the put.

Which stock is it?

P.S. I highly doubt you will get 0.03 for 120 puts. And your margin for selling 800 puts would be almost one million dollar. So even if you could get 0.03 and keep all the premium, the return on margin would be 0.24%, before commissions. Hardly worth the risk.

That is correct. But while it might seem like a free money, this is not the case. You also need to consider the margin required to sell 800 naked puts.

That is correct. But this assumes you can get 0.03 plus it ignores commissions.

Good job, but please be aware that this is a very high risk trade. With only one day to expiration, the risk of 50-80% loss is real. Please do NOT go big with those trades.

What was the trade?

Sounds reasonable. And yes, please share the results.

I'm often asked which tools I personally would recommend. I believe that ONE is the most essential tool to analyze, design, monitor and backtest different trades and strategies. ONE automatically keeps track of all adjustments and commissions throughout the life of each position giving you the cummulative profit and loss figure, allowing you to concentrate on developing and then executing the best trading decisions. CMLviz Trade Machine is an excellent tool for backtesting different strategies. Volatilityhq and chartaffair.com are also mostly backtesting tools, but are more tailored to our strategies. They provide tools for trading the Steady Options strategies. Those I believe are the three most useful and essential tools.

ONE software.

Here you go - Butterfly Spread - The Basics

What is tricky about trading VXX is timing. Yes, it goes down over time, but if your timing is off, you can easily lose 100%. This is why our Creating Alpha strategy is using collars to reduce the risk.