3 Tough Lessons I Learned after Trading Options for 1 Year

Back in May 2021, I started my options trading journey and I documented my trading recaps on this blog. As of today, I have been trading options for slightly over a year.

So, I thought it’s time for me to share the tough lessons that I learned after trading options for 1 year. I use the word tough because these were three mindsets that I thought was true, until time proved that it wasn’t.

Lesson 1: Option trading for consistent income is a myth

I used to think that option trading is a lucrative side hustle that can earn me a consistent income. I had great months from May to Oct 2021 earning a couple of hundred bucks a month. I thought it could last. Unfortunately, it didn’t.

As stock market tumbled, my cash secured puts got called away and I had to keep pumping in cash. Instead of earning consistent income, this option trading keeps sucking my money.

Option trading is not like a part-time job that gives you a stable paycheck. Instead, option trading is like a start-up business with irregular income, sometimes you feast and sometimes you starve.


Lesson 2: No matter how careful you are, you can still lose a lot of money, fast

I used to be think that I’m quite conservative when doing option trading. I would close my trades if I’ve earned about 70-80% of the profit. I believed that being careful is all you need to win, that watching the chart like a hawk every day will be enough to prevent me from going under.

Nope, being careful was not enough.

No matter how careful you are, there are things that you can’t control, like earning result, war, govt intervention, crisis and etc. These bad events might happen overnight and when you wake up the next day, the price of certain stock shot up or fell down, and you don’t have time to adjust your position because you can’t trade option outside trading hours.

Some may argue that these are the same risk involved when owning a share, but when you’re trading option instead of stocks, you have a time limit in which the price has to go in the same direction as your bet in order for you not to lose money. In stocks, you don’t have time limit, you can hold the stock as long as you wish, you can ride out the hard times, you can’t do so in options trading.

And yes, you can lose money fast. I lost 2k in a night.


Lesson 3: No, you can’t roll every losing trade!

I told myself a couple to times not to be afraid if stock price is going against me, because there is this thing called “rolling” where you simply close your losing position and open another position with further expiration and/or better strike price.

The truth is… not every stock can be rolled!

For example: I’ve been rolling my PLTR for almost a year now and my strike price ($19) is still not getting close to the current price ($9). Meanwhile, I could easily roll BABA.

If not every stock is roll-able, that means, option trading is not a sure-win. No matter how good your strategy is, if you get caught in a bad situation or bad timing, you WILL get burned.

Now I understand why people say that trading option to earn premium is like picking penny in front of a steam roller. The risk is too high.


So, what’s next?

I know, all my 3 lessons sound really negative, but those are the harsh truths. I’d rather share the ugly truths rather than sugar-coated truths.

I didn’t have a good year in option trading. My account size has shrunk 35% by the end of May 2022.

When times were tough, I did take several mini-breaks here and there. That explains why I’ve been quiet on the blog for almost 3 months.

I don’t plan to quit trading options. At least, not yet.

What I want to do is to take less risk and trade less frequently. I will keep fine-tuning my strategy, keep researching and learning to be better. Perhaps, after I’ve put in 10,000 hours of effort, I will get better at this option trading thing.

If you find this post helpful, feel free to buy me a coffee :)

This Post Has 4 Comments

  1. oliver

    Hey, will you consider writing a blog/coach people on options? I am just starting only, seems like a lot more downsides than upsides. 🙁

    1. prudentdreamer

      Hi Oliver, I’m not an expert in option trading, I lost so much money, I doubt anyone would want to learn from me.. Yes there is too much downside, only the persistent people can ride through the bad days..

  2. Xavi

    Sorry to hear that, I see you are feeling bad about options. Why don’t you try with an etf? Iwm is great. 1 year is not a lot of time, keep in mind that everyone that started any strategy lasy year is down now, I am down 30% on my buy and hold strategy with mostly blue chips. Istill think you can do it with IWM, Bac, etc. stocks you dont mind holding a while when they are down, only profitable companies, but the key point here is that any strategy from last year is down. Thanks for sharing.

    1. prudentdreamer

      Hi Xavi, thanks for your suggestions, I will look into it! What you said makes sense, everything was down in the past 1 year. I’m now out of cash to do cash secured puts, I’ll mainly do covered calls for now, since I’ve already earned several lots of Chinese stocks. Thank you for sharing!

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