<story><title>Wiped-Out Hedge Fund Manager Confessed His Losses on YouTube</title><url>https://www.bloomberg.com/news/articles/2018-11-19/hedge-fund-s-accounts-liquidated-amid-energy-market-volatility</url></story><parent_chain><item><author>chollida1</author><text>Such is the life of an option seller, especially naked option sellers.  You are picking up the proverbial nickle in front of the steam roller.&lt;p&gt;The really unfortunate part of this is that some of his clients actually owe more money than what was in their account.&lt;p&gt;There is a scummy way of managing money that some CTA&amp;#x27;s use where you don&amp;#x27;t get the proper license to manage others money as a hedge fund and instead just have people put money into accounts and then they give you the right to trade.  Due to the use of leverage when the market moved against their naked short Nat Gas positions all the collateral posted in the accounts were not enough to covert the losses so some people are not only out the amount they wagered, but more.&lt;p&gt;And the worst part of it is the manager blaming this on an unforeseen event.  Everyone who sells options knows that rule one is never be naked when you are short as your losses can be unbounded.&lt;p&gt;The reason for this is that if you have traded for even a short period of time you realized that while the market is liquid most of hte time, there are times when its not and the only thing you can do is watch it move while realizing you can&amp;#x27;t exit a position.&lt;p&gt;This happend to short sellers of KBIO when they thought they were riding a shitty stock to zero, when Martin Shkreli bought it for a premium causing margin calls for everyone short it.&lt;p&gt;See:&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.investopedia.com&amp;#x2F;articles&amp;#x2F;investing&amp;#x2F;112315&amp;#x2F;did-martin-shkreli-intentionally-burn-kalobios-shorts.asp&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.investopedia.com&amp;#x2F;articles&amp;#x2F;investing&amp;#x2F;112315&amp;#x2F;did-m...&lt;/a&gt;&lt;p&gt;As a side note Martin has a blog. 
&lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;martinshkreli.com&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;martinshkreli.com&amp;#x2F;&lt;/a&gt;&lt;p&gt;its actually pretty good as this is what he does for a living and when hes out of prison he&amp;#x27;s going to try and go back to it so this is really the only way he can redeem his brand. I expect him to put everything he has into the blog.  its&amp;#x27; a good source of trading ideas.&lt;p&gt;TL&amp;#x2F;DR&lt;p&gt;- never sell options&lt;p&gt;- if you do then never sell naked options&lt;p&gt;- if you do make sure you can get out of your trade&lt;p&gt;- if you can&amp;#x27;t get out of your trade make sure  you are well capitalized for loss absorption&lt;p&gt;- if don&amp;#x27;t have enough to cover your losses don&amp;#x27;t apologize for losing your clients money while wearing a $10,000 watch and post it for the rest of the world to see.</text></item></parent_chain><comment><author>ChuckMcM</author><text>&amp;gt; &lt;i&gt;never be naked when you are short as your losses can be unbounded.&lt;/i&gt;&lt;p&gt;I wish it was a requirement for people to have this tattooed to their body if they start trading naked options. It is so sad to watch a friend, who is otherwise brilliant, get caught up in the idea that they can make unlimited money because they &lt;i&gt;know&lt;/i&gt; that this commodity is going to &amp;quot;drop like a rock.&amp;quot; And then watch them lose their savings when things were different than they expected them to be. You get to hear about conspiracies of people who &amp;quot;tricked&amp;quot; them, rating agencies that &amp;quot;lied&amp;quot; about what was going on, etc etc. So very sad.</text></comment>
<story><title>Wiped-Out Hedge Fund Manager Confessed His Losses on YouTube</title><url>https://www.bloomberg.com/news/articles/2018-11-19/hedge-fund-s-accounts-liquidated-amid-energy-market-volatility</url></story><parent_chain><item><author>chollida1</author><text>Such is the life of an option seller, especially naked option sellers.  You are picking up the proverbial nickle in front of the steam roller.&lt;p&gt;The really unfortunate part of this is that some of his clients actually owe more money than what was in their account.&lt;p&gt;There is a scummy way of managing money that some CTA&amp;#x27;s use where you don&amp;#x27;t get the proper license to manage others money as a hedge fund and instead just have people put money into accounts and then they give you the right to trade.  Due to the use of leverage when the market moved against their naked short Nat Gas positions all the collateral posted in the accounts were not enough to covert the losses so some people are not only out the amount they wagered, but more.&lt;p&gt;And the worst part of it is the manager blaming this on an unforeseen event.  Everyone who sells options knows that rule one is never be naked when you are short as your losses can be unbounded.&lt;p&gt;The reason for this is that if you have traded for even a short period of time you realized that while the market is liquid most of hte time, there are times when its not and the only thing you can do is watch it move while realizing you can&amp;#x27;t exit a position.&lt;p&gt;This happend to short sellers of KBIO when they thought they were riding a shitty stock to zero, when Martin Shkreli bought it for a premium causing margin calls for everyone short it.&lt;p&gt;See:&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.investopedia.com&amp;#x2F;articles&amp;#x2F;investing&amp;#x2F;112315&amp;#x2F;did-martin-shkreli-intentionally-burn-kalobios-shorts.asp&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.investopedia.com&amp;#x2F;articles&amp;#x2F;investing&amp;#x2F;112315&amp;#x2F;did-m...&lt;/a&gt;&lt;p&gt;As a side note Martin has a blog. 
&lt;a href=&quot;http:&amp;#x2F;&amp;#x2F;martinshkreli.com&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;http:&amp;#x2F;&amp;#x2F;martinshkreli.com&amp;#x2F;&lt;/a&gt;&lt;p&gt;its actually pretty good as this is what he does for a living and when hes out of prison he&amp;#x27;s going to try and go back to it so this is really the only way he can redeem his brand. I expect him to put everything he has into the blog.  its&amp;#x27; a good source of trading ideas.&lt;p&gt;TL&amp;#x2F;DR&lt;p&gt;- never sell options&lt;p&gt;- if you do then never sell naked options&lt;p&gt;- if you do make sure you can get out of your trade&lt;p&gt;- if you can&amp;#x27;t get out of your trade make sure  you are well capitalized for loss absorption&lt;p&gt;- if don&amp;#x27;t have enough to cover your losses don&amp;#x27;t apologize for losing your clients money while wearing a $10,000 watch and post it for the rest of the world to see.</text></item></parent_chain><comment><author>tomp</author><text>&amp;gt; There is a scummy way of managing money that some CTA&amp;#x27;s use where you don&amp;#x27;t get the proper license to manage others money as a hedge fund and instead just have people put money into accounts and then they give you the right to trade.&lt;p&gt;That’s not scummy. Some clients want it set up that way, so that they have control over the money, they can terminate their account at any time or transfer control to another asset managemer, there’s no chance of the fund suspending withdrawals or something similar (which you could also say is scummy).</text></comment>