I have only made money on options twice: early 2013 and early 2016. In between I have generally bled slowly as Curt says.
It's the weekend, and maybe this can be of help to some of our new posters, so here is my testimony.
In 2013, I had outsized returns with stock only. I went all-in in the 30s, and rode it all the way up to 190. Then TSLA entered a painful decline, triggered when a couple of car batteries experienced exothermic reactions after encountering road debris. I eventually succumbed to abject fear, and managed to sell everything
at the exact bottom around 120, realizing a 40% loss.
I made it all back in spades in the next spring, on the back of the run to 265 with an extremely aggressive option play. I promptly concluded I was a genius, and proceeded on what I thought was a certain path to another 10x by trading only options. That plan, which was beautiful and perfect, led to something closer to 3x, but in the other direction. I bled even more over the next year, still trying to recapture the magic of option fireworks, like a crack addict chasing the high of their first hit (and with equally beneficial results).
Then it dawned on me that when experienced traders say "don't play with options if you don't know what you're doing", they say it for a reason. That reason was staring me right in the face from the bottom line of my brokerage account.
For the next 6 months or so, I slowly learned how to be more conservative, less emotional, and most importantly to stop indulging in the kind of day-dreaming that protagonists of all lottery ads in history like to engage in. Visualizing 3x, 5x, 10x gains when buying calls blinds you to the downside, and is the addiction mechanism underlying destructive gambling behaviour. It distorts thinking beyond the capability of amateurs (like me) to detect it. The question is, when those calls expire out of the money, what do you learn from it?
How do you learn? And how much will you have to lose to start to
really learn? The kind of self-examination you need to do to improve your performance is insanely hard to do, doubly so when you do it alone, with nobody helping you as a non-involved, objective evaluator. There is a reason why Bobby Axelrod (a high-powered hedge manager in the TV series Billions, for those who don't know) employs the services of a top-notch psychologist for himself and his trading team.
Options are powerful weapons. In the hands of the inexperienced trader, they are all-but-certain to turn into weapons of mass destruction of capital. For the reasons illustrated above, the worst thing that can happen to such a trader is to make a lot of money with the first few option trades.
One can detect the heartbreak in some of the posts in this thread when TSLA loses 3% in one day (which is very common with TSLA). "It's at 255 now. Scratch that, it's 250. Will it go back up today? By next week? Should I sell now? Or should I buy more? What do you guys think?"
If you're asking those question in that manner, you are in
way over your head. I've said it before, but it's worth repeating: if trading stocks is like ballroom dancing, option trading is like mixed martial arts. If you are a beginner, you should stay out of the octagon. If you get in anyway, expect to bleed and be knocked out on a regular basis. Pain can be a tremendous teacher if you can take it, but 9 times out of 10 you're just going to get killed.
