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I left them a few months before they were caught up in PFGBest scandal (Owner of PGFBest stole customer account money.). I left because he was losing money after making very good money at first.
This is quite distressing to hear. A few years ago, I was more active in selling options naked, and got burned by natural gas (no pun intended). I concluded that trying to pick up pennies in front of a steamroller was eventually not going to end well.
OptionSellers' website has been altered twice- it first removed all links to any information other than contacts for them and the clearing firm INTL FC Stone. Just a bit ago the clearing firm's info has been removed from the site.
In speaking to the clearing firm, in a roundabout way, a liquidation of /NG positions is occurring. They are caution how questions are answered, and rightfully so. But clearly Cordier is in trouble. Hopefully assets from accounts not holding /NG positions are not being used to pay the debit... See how it plays out.
As a side note, CNBC has been alerted to investigate further, since Cordier is a contributor at the broadcast.
What happened at OptionSellers is terrible, especially since they target retirees and tout the relative safety of the “diversification” they offer.
When not trading derivatives, my day job finds me as a former prosecutor turned securities attorney. I am currently investigating the implosion at OptionSellers (Cordier and Gross) and would appreciate any opportunity to speak with anyone that may have been caught up in this mess. If you or a friend may have been involved, or if you have any information or experience about their firm, please consider sending me a private message so we can arrange a confidential call.
Below find and update on the status of things as they stand today.
We have received many calls over the past 48 hours. I apologize that we cannot take everyone’s calls right away. Please understand that we have 300 clients and only 3 traders here to take calls. Combined with the fact that we are still unwinding positions, this creates a bit of a time crunch. Nonetheless, we are working through call schedules as fast as possible. Everyone WILL get a call back who would like to talk by phone – but this could run into next week.
However, the purpose of this memo is to give you a full update and keep you apprised of the situation and answer the questions you may have.
I do appreciate the cordiality expressed by everyone we have spoken with so far during this difficult time.
Below please find a Q&A of the most common questions being asked.
Understand that these are blunt, direct answers as you’re a mature investor and deserve straight talk:
What Happened to My Account?
Your account was caught in an extraordinary bout of volatility in the energy markets. In particular, natural gas prices experienced a parabolic move over the past 3 trading sessions. We had a short call position here that was on the wrong side of this. The magnitude of this move was so fast and intense that it overwhelmed all risk measures in place. It was like nothing we’ve ever seen. It was featured on page B1 and B12 of today’s Wall Street Journal. For anyone wishing to learn more about the actual market conditions causing this, I recommend reading both articles. It seems there are other traders and hedge funds across the country that have run into difficulty resulting from the same move. Regardless, the move was so intense that losses multiplied exponentially in a very short period of time. While we exited using all the risk measures we’ve always used, it was not enough. The event resulted in a catastrophic loss to the portfolio. Your account now likely not only has a zero balance – the balance is likely slightly debit.
What is a Debit Balance?
Debit balance means the account is less than zero (negative balance) and that you may owe money to bring the account back to zero. Futures are an automatically leveraged product. Which means that it is possible to lose more than you initially put in. While I have never seen this happen – or even come close to happening since inception of managing these portfolios, I’m afraid it did happen as a result of this event.
Have I lost all the money in my account, then?
Yes
What do I do about this Debit Balance?
You likely received a debit call notice from FC Stone this morning via email. You may receive it in the mail as well. This is a call to add funds to bring the balance back up to zero. Instructions for paying the balance are on the notice. Any questions on debit balances can be directed directly to FC Stone at the number on the notice. Stone requests the funds asap but if it takes a few days, that is OK.
What happens if I don’t pay the balance?
We recommend balances be paid. If it is not paid, it becomes like any other unpaid bill.
Where do we go from here/what do I need to do?
At this point, other than unpaid debit balances, nothing. The accounts will likely be fully liquidated by Friday. Unless we hear from you otherwise, your account will be closed out and you will be issued a final statement.
Will I be able to write this off on my taxes?
I believe at least a portion. But it’s a better question for your CPA.
What Will Happen to OptionSellers.com?
At this point, that is uncertain. However, our doors will remain open in the coming weeks to process account closures and answer any follow up questions.
We do appreciate your patience during this difficult time. We will be issuing another update before the weekend.
