At first glance, selling options can look like a great way to earn steady income. The idea is simple: you collect premiums upfront by betting that the options you sell will expire worthless. If that happens, you keep the premium and walk away with a profit. It sounds easy and low-risk—almost like free money.
But behind the promise of consistent returns lies a level of risk that many underestimate. One of the most infamous examples of this is the collapse of OptionSellers.com, a firm run by James Cordier, which blew up in spectacular fashion in November 2018. This article breaks down what went wrong and the important lessons every trader can take from it.
What Is Option Selling, and Why Is It Risky?
Selling options means writing contracts (calls or puts) and receiving a premium in return. You're essentially making a bet that the market won’t move past a certain price. If you're right, the options expire worthless, and you keep the money.
For example, if you sell a call option, you're agreeing to sell the underlying asset at a specific price (the strike price) by a certain date—if the buyer chooses to exercise it. If the market doesn’t reach that price, the option expires, and you keep the premium.
So far, so good. But here’s the catch: when things go wrong, they go very wrong—especially when you're selling “naked” options (without holding the asset or a hedge to protect you).
Here are some key risks:
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Unlimited Losses: If you sell a naked call and the market skyrockets, you could be forced to buy the asset at a huge loss.
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Sudden Volatility: Markets can move fast. A big swing in prices can inflate option values and trigger costly margin calls.
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Leverage Trouble: Taking on large positions relative to your account size can magnify losses.
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No Hedging: Without protective strategies in place, you’re wide open to disaster.
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Margin Calls: When things go south, brokers may require more capital—or they’ll liquidate your positions at a loss.
These risks all came together in the perfect storm that brought down OptionSellers.com.
The Rise and Fall of OptionSellers.com
James Cordier launched OptionSellers.com in 1999. He positioned himself as an expert in the field, even co-authoring a book titled The Complete Guide to Option Selling. His firm catered to wealthy investors—clients had to invest a minimum of $250,000.
Cordier’s pitch was simple: sell deep out-of-the-money options on commodities like natural gas, crude oil, and gold. He claimed this strategy was conservative and well-managed, with a diversified portfolio and a clear risk model (including rules like never risking more than 5% per trade).
In reality, things weren’t nearly as disciplined.
The 2018 Collapse: What Went Wrong
By late 2018, OptionSellers.com was managing about $150 million for nearly 300 clients, including high-profile investors like Tampa Bay Lightning owner Jeff Vinik. But Cordier had taken on massive, unhedged bets—especially short call options on natural gas.
Then, in mid-November, natural gas prices spiked by 20% in a single day—the biggest move in almost a decade. It was driven by colder-than-expected weather forecasts. At the same time, crude oil prices dropped, hurting his short puts there, too.
Cordier’s fund was completely exposed and overleveraged. Here’s where he went off the rails:
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Massive Overexposure: One example? He had 218 naked short calls on natural gas in a single $1 million account—over 40 times the risk he claimed to allow.
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No Safety Net: These were completely unhedged trades. He didn’t buy higher-strike calls to cap his risk.
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Ignored Volatility: Natural gas is notoriously volatile, and Cordier underestimated how fast things could change.
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Abandoned His Own Rules: Despite outlining a risk model in his book and marketing materials, he didn’t follow it. His portfolio was heavily concentrated in just a few commodities, particularly energy.
When the market turned, everything collapsed. His broker, INTL FCStone, issued margin calls he couldn’t meet. The firm liquidated positions at a loss, and every client lost their entire investment.
Worse still, many clients owed money to cover margin deficits. One investor lost $1.8 million and still owed $571,000.
The Aftermath: Apologies, Lawsuits, and Devastation
On November 15, 2018, Cordier sent out an email titled “Catastrophic Loss Event” to notify clients of the total wipeout. He followed it up with a YouTube video apology that quickly went viral—not for the right reasons.
In the video, Cordier choked up as he talked about the losses, but also included bizarre comments about a missed vacation to the French Riviera. Many viewers found it tone-deaf and self-indulgent.
Lawsuits quickly followed. Many clients were retirees who lost their life savings. Some even passed away before restitution could be made. Lawyers alleged negligence and misrepresentation. Cordier’s clearing firm, FCStone, claimed it was only responsible for executing trades—but investors said the broker enabled reckless behavior for commission gains.
Hard Lessons from a Preventable Disaster
The OptionSellers.com story is a case study in what not to do. Here are some takeaways for anyone considering selling options:
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Risk Management Is Non-Negotiable: Always use strategies that cap your losses. Spreads, stop-losses, and hedging tools exist for a reason.
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Keep Positions Small: Avoid betting large portions of your account on a single idea. The market doesn’t care how confident you are.
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Know Your Market: Commodities like natural gas are especially volatile. Backtest your strategies and understand historical patterns.
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Diversify Properly: Don’t just talk about diversification—actually practice it. Cordier's portfolio was far too concentrated.
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Stay Humble: Past success can lead to dangerous overconfidence. No strategy is bulletproof.
A Smarter Way to Sell Options
Let’s say you’re trading a $100,000 portfolio and want to sell options on the S&P 500 (SPX). Instead of selling naked calls, you could use a credit spread:
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Sell a call at 4,500 for a $5 premium.
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Buy a call at 4,550 for a $2 premium.
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Net gain: $3 per contract ($300).
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Max loss: $47 per contract ($4,700), even if SPX skyrockets.
Limit yourself to a $2,000 risk allocation (2% of your portfolio), which allows you to hold only 4 contracts. This approach caps your losses and avoids the kind of wipeout Cordier faced.
Final Thoughts
James Cordier’s story is a powerful reminder that even the most seemingly stable trading strategy can implode without proper risk management. Option selling isn’t inherently bad—but it demands discipline, humility, and strong safeguards.
If you’re considering selling options, learn the mechanics, use protective strategies, and never overleverage. The market is unpredictable, and as Cordier learned the hard way, one unexpected move can erase years of profits—and more.
Before diving in, ask yourself: What’s the worst that could happen? And make sure you’re prepared for that answer.
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