James Cordier net worth used to be massive, until he got greedy and sold too many call options on natural gas.
David Jaffee of BestStockStrategy.com receives a lot of questions and comments about OptionSellers.com.
The hedge fund lost around $150 million of their clients’ money, and I break down where Option Sellers went wrong, you can also read his previous article about James Cordier and OptionSellers here
Option Sellers was a hedge fund that had around $150 million in assets under management, which is quite small for a hedge fund.
It was run by James Cordier, once referred to as the “options king” or the “king of options.”
Perhaps he referred to himself as this.
Option Sellers sold option premium, which is a fantastic strategy.
However, they went bust for 4 main reasons.
OptionSellers Greed & Trading Too Large
The first and second reasons that Option Sellers went bust is that they got greedy and they traded to large.
When you sell option premium, there’s a way to design trades that are profitable 90% -95% of the time.
While you are profitable 95% of the time, you have to manage your trading size, and also hedge your position to ensure that the ~5% of trades that you lose won't hurt your overall returns.
If your trading size is too large, you can end up losing a substantial amount of money.
This is exactly what happened to OptionSellers.com, and you shouldn’t let it happen to you.
A similar situation happened to a few of my option trading members in March 2020.
Prior to March 2020, these traders were winning almost every single trade, but it was not enough for them to earn ~3% each month trading options.
Instead, they tried to earn 10% per month by selling strike prices that were too close to the current market and selling too many contracts.
When March 2020 rolled around, these positions went against them.
Instead of being able to roll and manage these positions, and wait for a volatility contraction like the rest of my members, they were forced to close the positions for a loss.
The same is true for OptionSellers.com.
They got greedy because they were used to winning almost every trade.
They traded too large and chose strike prices that were too close to the current market price - and they blew up because of it!
In fact, their trading size was probably about 10 times larger than it should have been.
Trading Commodities
Option Sellers was trading commodities, which also contributed to their downfall.
Commodities have a history of going hyperbolic, whether it be to the upside or the downside.
It is not uncommon for a commodity to go up, or down, ten days in a row.
For Option Sellers, James Cordier's natural gas position is an example of this, as the commodity went up 60% in one week.
When you trade commodities, they are inherently more risky than equities. Option Sellers did not properly manage its risk when trading options on natural gas.
Equities have more two-sided action; the price of a stock is supported by earnings, dividends, hedge funds, private offices, private wealth management, pension funds, etc.
While commodities have liquid markets, they are still relatively small when compared to most liquid stocks.
What happened with natural gas happens happens relatively frequently with commodities - the same thing happened in January of 2016 when oil fell, in August of 2018 when gold fell and also in 2020 when futures prices of oil delivery went negative.
Trading commodities is one of the main reasons why OptionSellers.com went bust - they failed to plan for the extreme volatility and they failed to hedge their position.
OptionSellers and James Cordier were Unlucky
The final reason that Option Sellers blew up is that it simply got unlucky with James Cordier options selling strategy.
When you trade commodities, there is a higher possibility that you will get unlucky.
While commodities do experience boom and bust cycles, it's still rare for a commodity to increase by 60% in a week.
When trading options and selling premium, you'll likely lose around ~5% of your trades - and it's important to ensure that those 5% of losing trades are small losses, not large losses.
You can do this by not trading too large and also by hedging your positions.
When Option Sellers traded commodities, they should have traded about 1/10 of the size they were trading at that time.
Ironically, Option Sellers original premise, that natural gas would fall, was correct; had they not been forced to close out their position for a major loss, they'd have made money, as natural gas crashed shortly after their fund blew up.
Key Takeaways from OptionSellers.com
Simply put, it was a perfect storm of all these factors that led Option Sellers to fail.
While trading options is a great trading strategy to earn consistent profits, it has to be done correctly!
Trade options, but learn from the OptionSellers.com disaster:
Don’t get greedy, watch your size, avoid commodities, and place yourself in a position where even if you experience bad luck, you won't be forced into a margin call!
Want to know the best strategy for selling option premium?
My online options trading course provides a comprehensive guide and it's the only course you'll ever need.
Frequently Asked Questions (FAQs) - James Cordier and OptionSellers
How much money did James Cordier lose?
The hedge fund lost around $150 million of their clients' money, and David Jaffee breaks down where Option Sellers went wrong in this article
How did James Cordier lose money?
In mid-November 2018, Cordier bet that natural gas prices would go down while crude oil prices went up.
The reverse happened, and just like that, his clients lost at least $150 million.
"Needless to say, the events of this past week have been incredibly devastating,'' Cordier said in a flat-voice apology on YouTube.
Where is hedge fund manager James Cordier now?
James Cordier seems to have disappeared from the public eye after his hedge fund blew up. Even so, despite losing $150 million of client money, I believe that he's still wealthy (after hiding assets) and he's likely living a good life.
In October 2024, it seems that Cordier is trying to make a comeback under https://navigationtrading.com/ - he's also been filing fraudulent DMCA / Copyright Notices to scrub the internet of his prior failure.
Do option sellers really make money?
Yes, they can, as long as option sellers hedge their positions and do not trade too large, then they can be consistently profitable.
What is James Cordier's net worth?
I would estimate James Cordier's net worth to be around $40 million dollars. Despite losing his client's money, it's likely that Cordier has other assets that he's safeguarded to protect his own wealth.
Any other articles on James Cordier and OptionSellers.com?
Other good articles about James Cordier and OptionSellers are here and here.
James Cordier, where is he now?
It seems that Cordier is trying to make a comeback under https://navigationtrading.com/ - he's also been filing fraudulent DMCA / Copyright Notices to scrub the internet of his prior failure.