With regards to a recent blowup of optionsellers.com - several analysts (specially on Quora) are blaming it on their strategy of being short gamma i.e. selling options. Is it correct to call short-gamma "picking up pennies in front of a steam rollers"?
I am not convinced that this is the right explanation, because putwrite indexes that long T-bills (collateral for covered put-writing) and short index options do not blow up - or at least haven't yet. Some have exhibited better sharpe ratio than the underlying. Optionsellers.com people were selling naked puts on volatile commodities and using other people's money. I think their cowboy risk management (or lack thereof) was to blame.
What is your analysis?
Blew up so bad clients woke up with negative balances - https://www.ft.com/content/b7c525f6-ec44-11e8-89c8-d36339d835c0
P.S. My first post here. I'm not a professional. Just a software engineer who likes to study random things. Please be kinder to me than we are to you as a group on stackoverflow ;)
P.P.S If this post is inappropriate, kindly suggest edits.