Did some digging: OptionSellers hedge fund lost all its money and then some today/yesterday. The fund had a minimum deposit of $100,000 and dozens of people put more than $10,000,000 into the fund. Right now from what I have been reading its in the hole 125%. Meaning it owes other people 25% above deposits.

The funds objective was to make money like every other hedge fund is. This one though is highly suspicious in the fact it makes its money through options, also known as a form of "derivative." In a recent review of Goldman Sachs I did, I found Goldman was using derivatives to an extent that was highly irregular especially in over the counter commodities. OTC commodities can be a highly suspicious business to be in where investments are not very liquid, or easily sellable. This hedge fund was built on the foundation that they would never go to zero using all possible investments that could, in fact, go to zero if the conditions were right. Well, this week the conditions were right when it placed a major short bet on oil. Oil had a small spike yesterday and today that caused the fund to lose all of its money. If you look at the oil charts it was very very small jump, and practically unavoidable losses for the fund the way it was leveraged. This practically lead to the worlds largest margin call; simply shameful someone would put money on the line like this in a position of power.

Please, people never invest your money into a hedge fund that you, yourself doesn't understand the strategy behind their operations. Better yet do your own investing. Complexity is a sin; not a virtue. Let this be a lesson to any younger or just starting investors. NEVER invest in anything you don't know and NEVER invest where you can jeopardize more than 100% of your total assets. When you short sell something you could in fact lose more than you have invested. If you short sell a stock that is $10 and it goes to $21 you not only lost your $10 you lost an extra dollar beyond that. Short selling on leverage or margin is also a very bad idea. There will be no forgiveness for this level of stupidity trading oil or other third tier "speculation bets" aka commodities. This is why I would never short Tesla. I say I would never (at this time) buy it either. The stock is built on hype, not logic and its best to stay as far away from these as you possibly can.

I'll say one last thing about options, in very small supplemental portions of a portfolio they are totally fine if you know exactly what you are doing. I will say though most people I see have not a clue what they are doing period. There will likely be commenters on this post that have not a clue what they are talking about and will argue this. Go ahead be my guest. You can make money with options I am not saying you can't. But the risk is increased in most situations.

The manager of the fund obviously did no basic risk calculation and did not do a what-if scenario.

In an interview with him JC is the fund manager:

BTS: What kind of options are you selling?
JC: We sell far out-of-the-money naked puts and calls, as well as strangles and condors on about 10 different commodities.

BTS: Naked or covered call option?
JC: For this example, naked. However, commodity options this far out of the money don't move dramatically like at-the-money stock options. We also incorporate a number of credit spread type of trades, which can offer a limited risk aspect.

BTS: What about diversification and use of margin?
JC: Typically we hold positions on 6-8 commodities at a time. We don't use maximum margin. Our goal is to take an aggressive investment vehicle and manage it conservatively.

BTS: Which commodities?
JC: We mostly trade metals (gold, silver), energy (gas, oil), and food (coffee, cocoa, sugar, corn), plus a couple of others.

BTS: How has it been going?
JC: We target 25% return per year. In 2015, which just ended, we achieved 28% return for our clients (net of fees). Which is good considering the stock market returned about 2% and most of the hedge fund guys had a lousy year.

BTS: Can you take me through a typical transaction?
JC: Sure. If we felt that gold was overvalued, for example, then we could sell calls that were 50% to 100% out-of-the-money and expire in 6-9 months. We might get $700 for the call and the margin requirement is around $1000. A single contract of gold controls 100 ounces, so this is an option on about $100K of underlying value.