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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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It's always March that gets them. March looks the fatest, it has the longest time to expiry, and the fatest vol. But it has that fat vol for a reason! Many of the biggest NG option traders have seen this happen several times before. They may lose a little money a few years in a row on this trade but the years they make, they get it all back and more.
If you look at the last 10 years, November is not the month natural gas rallies. This is very unusual but like mattz said above, they may have been the one who brought the volatility in. Most of the open interest on several of the strikes may have been just them.
Everyone should watch this so you can see how you will feel if you aren't careful. I know from my own experience it's a feeling you never want to know. I have been there and done that but not at the scale of his losses.
This is so sad and very hard to watch. The worse part for their clients is not only losing all their capital but owe more. Hope everyone makes it out ok from this.
Selling an ATM put option is a directional trade, just as buying an outright future. Delta is 50 %, the change of delta is very moderate compared to the change of delta of a FOTM option, as long as there are many DTE. The option is more or less moving at half the speed of the underlying future. Just as trading an outright future, you can place an end of day stop, and you will be able to get out easily with a high probility, sometimes having to accept a loss. If the stop is chosen properly the loss should not destroy your account. It does not matter, if you are a little bit in the money or out of the money.
In case there are only few DTE there is a significant gamma risk for ATM options. This is why I like Ron's rule of getting out at 50 % also for ATM options.
I had bought (!) an ATM Call NGH C3.0 on October, 29th for 0.268. The option traded below 1.000 yesterday evening. If I had sold this ATM option end of October (instead of buying it) my loss would have been less than 300 %. That is no fun, but - assuming an appropriate money management (size of the position 1 - 3 % of account) - the loss would be in the order of magnitude of max. 10 % of the account. The days before the loss might have been 15 % of the account. Still no catastrophe. I assume that Cordiers money management was ok. But selling the OTM calls had a severe delta and gamma risk, that hit his accounts.
In my opinion there are two risks selling ATM options: The gamma risk with few DTE, and the risk of being wrong regarding the fundamentals. This makes these trades very different from selling OTM options. But as long as there are enough DTE the gamma risk is manageable.
That is why I am of the opinion to place the capital in different asset classes, eg. real estate, gold, stocks, futures & options, and a government-run retirement account.
