3 Lessons From the Recent Slide of Options

1.Know with whom you are investing. The firm’s website and most of the principles’ online presence has been closed or scrubbed. But some remaining screenshots show the company appeared highly promotional and less than professional.

The marketing material was filled with unrealistic promises and the strange practice of grouping its customers with labels such as “platinum member,” or “founders club” — based on the size of their account. This is the type of thing a newsletter does, not a professional money manager.

There are actually some questions whether this firm and its principals were even registered or qualified to run managed accounts.

A quick search also shows the firm and its president James Cordier had been involved in prior securities fraud lawsuits and questionable practices.

Needless to say, new lawsuits are already being filed.

2. Know the Strategy: The name of the firm OptionSellers.com pretty much summed up their strategy. They sold option premium.

They positioned this as a safe way to “generate income” which sounds conservative. Unfortunately, they did it by selling “naked” or uncovered options, meaning on margin, which comes with unlimited risk — something I’m sure most of their clients didn’t fully understand or appreciate.

I’m not even sure the people managing the accounts understood the risk.

The president of the firm issued this strange video trying to explain what happened. He does a lot of call-outs to individuals telling them how sad he is that he’ll never get to go bass fishing, but barely explained what actually happened.

3. Know Yourself: It’s crucial to understand your own personal goals, risk tolerance and level of knowledge.