AIMCo’s $3-$4 Billion Volatility Trading Blunder

AIMCo’s $3 – $4┬áBillion Volatility Trading Blunder


The MULTIBILLION DOLLAR volatility trading blunder by AIMCo serves as a stark reminder of the importance of prioritizing safety in options trading. For years, SJ Options has emphasized this crucial aspect of trading, urging traders to move away from strategies solely focused on theta and probability. Despite their allure, such approaches carry significant risks that often go unnoticed until it’s too late.

Consider the recent market crash spurred by the coronavirus pandemic. Traders who relied on strategies like put front ratios, short strangles, bull put spreads, iron condors, and others faced substantial losses. Yet, many traders fail to account for the possibility of experiencing significant losses early in their trading journey, a scenario that’s more common than one might think.

So, why do options traders gravitate towards these risky methods? One reason is the prevalence of popular educators promoting these strategies as quick paths to wealth. However, the reality is far from glamorous, with losses amounting to thousands, millions, or even billions of dollars.

It’s high time for traders to adopt a safer, risk-averse approach to their investments. Instead of chasing quick profits, prioritize protecting your capital and minimizing risks. Conduct thorough research, analyze the potential outcomes of different strategies, and focus on preserving your assets over the long term. By embracing a more prudent approach, you can safeguard your investments and mitigate the likelihood of devastating losses.


The investment manager AIMCo’s reported losses during the recent economic collapse shed light on the risks associated with certain options strategies, particularly those reliant on stable market conditions. The strategies mentioned in the report, such as short strangles and condors, are indeed examples of options strategies that profit when the market remains stable or moves within a narrow range. These strategies often involve selling volatility and can be considered short vega positions, meaning they benefit from a decrease in implied volatility.

However, AIMCo’s losses highlight the dangers of relying solely on these strategies, especially in volatile market environments. The term “wrong way volatility” suggests that AIMCo’s positions were adversely impacted by unexpected movements in volatility, leading to significant losses. By selling volatility and betting on stable market conditions, AIMCo’s investments were vulnerable to losses when volatility spiked during the economic collapse.

The statement by ATA president Jason Schilling underscores the importance of understanding the risks associated with investment strategies, particularly when managing large sums of capital. AIMCo’s misstep serves as a cautionary tale for investors and fund managers alike, emphasizing the need for thorough risk assessment and prudent decision-making.

Overall, this incident highlights the discrepancy between popular options strategies touted as profitable and the inherent risks they entail. It underscores the importance of education and risk management in options trading, as well as the potential consequences of overlooking these crucial aspects.

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