It seemed like a great investment, in natural gas. But like many energy-based investments, there is a considerable volatility involved that’s an uncontrollable variable. In other words, you never know what may happen tomorrow, especially when trading options or using leverage.
Natural gas posted its biggest one-day percentage gain on November 14. The next day, it posted its largest one-day drop in 15 years. According to news stories, OptionSellers.com was betting that natural gas would continue to rise. When it didn’t, everything unraveled, and the company was forced to begin liquidation. Many investors borrowed through margin accounts, some with considerable amounts invested.
Tampa, FL-based OptionSellers.com was a commodities trading firm that claimed to be experienced in this type of investment. The firm’s president and head trader, James Cordier, told a recent interviewer, “Our goal is to take an aggressive vehicle and manage it conservatively.” Unfortunately, that’s not exactly what happened. Trading “naked” on margin instead of “covered,” the firm left its investors vulnerable to unlimited exposure, leading to the losses. An article explains that “OptionSellers.com and its principals negligently engaged in a risky trading strategy that was unsuitable for its clients and breached its fiduciary duties to them by putting its interests ahead of its clients.”