Agreed. No it won't correct next week. It's still going to go up, and it amazes me that someone managing millions or hundreds of millions couldn't read the market when it was so obvious.
I did not mean that it is a nail in strategy coffin so to speak. It is a fantastic example that spreads are not safer than naked options. That is the point I was making. So many people are in fantasy land thinking that spreads are safe.
Doing a spread too close 1x1 not Much money can be made. And too far it is useless. Doing ratio is and thinking it is safer than naked is fantasy. Nakeds are fine, it is leverage and position size that is important.
You are not understanding this. This was naked short calls. Even worse, he was selling a 6 vol which is borderline mental considering at the money vol was trading 12 to 15. He was selling a deeply negative call skew. If he has any securities licenses they should be revoked. The "reason" the strikes were "too close" is because was selling 6 vol! The whole idea of selling skew is to sell a deeply rich skew or one you feel is deeply rich. This trade was over before he even initiated it. I read his whole strategy manifesto on the link the OP provided. He is a premium seller that was pissed vol was too cheap so he resorted to the nuke option. The market took care of him. This guy is not a poster boy against selling spreads but a poster boy again the sub 50 IQ crowd that routinely sells premium regardless of it's relative value.
Puts trade rich out of the money so put ratio spreads have a greater chance of success then call ratio spreads if you don't have a directional view. He could have sold put ratio spreads if he was slightly bearish as max profit would be marginally lower market not higher. If he was a big bear, he should have bought puts.
The website from the second post on this thread considered him a genius investor: http://www.futuresmag.com/2012/08/31/walczak-finds-safe-harbor-options