Wow, look at this slippery dead and skinned waterfowl I have in my hands. Gosh, it is so raw. OMG, what is it stuffed with? Wow! Two full heads of unwashed romaine lettuce! Ahhhg, what do we do with it? (throws it at MACD, trying to escape via the rear exit.)
November 21, 2018 Energy Losses Prompt Emotional Video to Options Firm’s Clients OptionSellers.com’s James Cordier says recent losses will likely mean the end of his firm James Cordier, founder of OptionSellers.com, in 2008. PHOTO: TAMPA BAY TIMES/ZUMA PRESS By Gunjan Banerji Updated Nov. 21, 2018 10:16 a.m. ET On Friday, the founder of OptionSellers.com, James Cordier, apologized in an emotional video to clients that losses from bad bets on energy prices would likely lead to the demise of his firm. Dressed in a suit and tie while sitting in a brown leather chair, he acknowledged that violent swings in the energy market last week caused the firm severe losses, potentially affecting its 290 clients. He said he had grown to consider individuals around the world as family members and lamented his failure to manage the surge in energy volatility. “You were my family, and I’m sorry that this rogue wave capsized our boat,” Mr. Cordier said in the video. It isn’t clear how much money Mr. Cordier’s firm oversaw or how much it lost. Archived snapshots of OptionSellers.com’s website—which has had almost all its pages taken down—indicate that the firm took minimum investments of $250,000. The firm is registered with the Commodity Futures Trading Commission as a commodity-trading adviser. Mr. Cordier didn’t comment, saying in an email that “in regards to this matter, this is our clients’ private business. We are in communication with them.” Dozens of OptionSellers.com investors have contacted Cleveland-based law firm ChapmanAlbin LLC, lawyer Jason Albin told the Journal. He said most understood they could lose their investments, but many didn’t realize they could actually end up owing money. E-mails to a client viewed by the Journal show OptionSellers.com was forced to start liquidating its positions last week following wrong-way options bets on oil and natural-gas prices. RELATED Natural Gas Is Getting More Expensive, and So Could Heating Bills (Nov. 14) Oil Falls Most Since 2015 on Fears of Oversupply (Nov. 13) As Oil Soars, Few Hedge Funds Are Left to Profit (June 6) The firm’s losses stunned investors and traders in both the options and commodities industries. OptionSellers.com has specialized in selling options contracts to collect income, according to the archived website snapshots. It isn’t clear exactly how the company was structured. Mr. Cordier described his firm as a hedge fund in the video. In archived snapshots of its website, the firm indicates it managed accounts of behalf of individual investors. The emails reviewed by the Journal say that as both oil and natural gas recorded unusually large moves last week, the firm suffered a “catastrophic loss.” Oil tumbled more than 7% on Nov. 13 for its biggest one-day loss in three years, while natural gas posted an 18% rise on Nov. 14 only to erase those gains the next day. Some clients were left with a negative balance, meaning they are in debt to INTL FCStoneInc., OptionSellers.com’s clearing firm, according to Mr. Albin and emails reviewed by the Journal. This can occur because of the use of leverage—using a smaller amount of money to make larger bets. Leverage can amplify returns if a bet turns right, but a losing bet can leave an investor owing more money than he or she initially put down. Accounts managed by OptionSellers.com “had to be liquidated” because of natural-gas volatility, a spokesman for INTL FCStone said in an email. He said INTL FCStone is in full compliance with regulatory requirements. ShakeupAn extreme bout of volatility in natural-gasprices caused steep losses for investmentfirm OptionSellers.com.Natural-gas futures, front-month contractSource: SIXAs of Nov. 21 .per million British thermal unitsSept. ’18Oct.Nov.2.503.003.504.004.50$5.00 Evan Torrie, a California-based software engineer, first decided to invest $250,000 with the firm in 2016 after Mr. Cordier pitched commodity derivatives to him, saying such assets diversified holdings. Mr. Torrie had grown concerned about the length of the stock bull market and was looking to invest outside of equities. A 2015 marketing document from OptionSellers.com reviewed by the Journal encourages investors to add options-selling to their retirement strategies. Mr. Torrie, who trades options himself, saw double-digit gains on his investment from its inception to July 2018. Pleased with the returns, he decided to add more money. But recently, over the course of just a couple of days, he went from having about $470,000 invested with OptionSellers.com to being roughly $150,000 in debt, he said. On Nov. 13, after oil prices plummeted, Mr. Cordier wrote to Mr. Torrie in an email reviewed by the Journal that he was confident the portfolio would recover from its steep losses at the time. But in a Thursday email, also reviewed by the Journal, addressed to Mr. Torrie, OptionSellers.com listed answers to frequently asked questions, including, “Have I lost all the money in my account, then?” The answer given: “Yes.” Also among the FAQs listed in the email: “What do I do about this Debit Balance?” The firm answered, “You likely received a debit call notice from [INTL FCStone] this morning via email. You may receive it in the mail as well.” Mr. Torrie said his first thought was “how could they have possibly done this in three days? All that money is wiped out.” Natural gas is infamous for its volatility. Wagering on different contracts in natural-gas prices can in some cases be known as a so-called widow-maker trade, because of how quickly bets can go bad due to shifts in weather. Numerous commodities hedge funds have shut down in recent years, and one of the last major oil hedge funds has suffered steep losses this year due to the turmoil in energy prices. In a Thursday client email reviewed by the Journal, OptionSellers.com wrote, “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.” The emails did little to assuage Mr. Torrie. “My lesson is: don’t trust other people to trade your money,” he said.
You should really check with a tax expert that you’re not making an excess IRA contribution or some other prohibited transaction when you try to settle your IRAs debt with taxable funds. If you don’t have other IRA assets, it’s possible the broker won’t have a case to come after you for the IRAs losses since the IRA is in many ways a separate legal entity from yourself. Not your lawyer or your tax advisor...
I am no attorney either but if there was no recourse to recover a debit balance in an IRA account no broker would offer trading of leveraged instruments in an IRA.
And that's where all of this enters a gray area. No traditional IRA can invest in any of these levered products. It's only when people transfer their IRA's into custodianship with one of about a handful of organizations can they then trade futures, futs options, etc, etc. Not sure who ultimately catches the fall out from this fiasco because it does seem like MoreLeverage has a very valid point.
IRA’s cannont trade with borrowed funds like traditional margin accounts. Limited margin accounts as they are called pertain to trading equities, the broker simply clears your funds immediately as opposed to t+3 so you can day trade and not run into Pdt limitations. You still cannot short stocks or borrow to buy more then you cash position. You can trade futures with almost any fcm. You need to execute custodial agreement with a non bank custodian. This would no more shield you from a debit balance in a futures trading account then it would shield you from paying for liabilities associated with a commercial real estate investment purchased with IRA fund through a self directed IRA, property taxes, utilities, payments to contractors, etc.