The Options Millionaire Episode 007 - Our Biggest Mistake Trading Options
Oct 8, 2023
They recount big trading mistakes that led to massive losses and what triggered them. One story covers overleveraging a credit spread and a shock earnings move. Another explores how lending family money and tax surprises upended allocations. They discuss recovery, risk rules they now follow, and a practical tip for managing stress and sleep after losses.
AI Snips
Chapters
Transcript
Episode notes
First Credit Spread Turned Into 110% Paper Loss
- Peter sold a credit spread on IBM as his first spread and paper-traded it believing the upfront credit justified the risk.
- Earnings pushed IBM down, the spread went deep ITM and Peter panicked, closing for a 110% paper loss that erased most year-to-date gains.
Focus On Worst Case First When Trading Spreads
- The key lesson Peter learned was to prioritise risk first when placing spreads, imagining the worst-case before chasing immediate credit.
- That risk-first mindset later helped him manage spreads better during the extended 2022 market decline.
Accept Losses And Emphasise Risk Control
- Accept that losing trades are inevitable and focus on a solid plan and controlled risk so losses remain manageable.
- Peter says when you focus on risk, losses become manageable and you can objectively review whether you did anything wrong.