Oh crap, I started trading options.

I’ve been buying stocks for a while. I tried my hand at it back in 2009 right after the market crashed. Bought Citigroup (C). Lost some money. I remember buying a Greek shipping company. I remember reading their 10k thinking I was smart. I learned how this company traded interest rate swaps to offset currency risk. Oh boy was I dumb. I lost some money there too. Mind you, nothing too large. Nothing my wife would kill me over. She knew I was gambling and I’ve always been honest with her. I show her all my trades and she hasn’t left me yet.

I discovered options before 2009. The coworker I shared an office with told me how people made $2k a month trading options as income. I thought that was nuts, but awesome at the same time. How can some gamble and consistently make this kind of money?!

Fast forward to sometime in the 2010’s. I was a genius! I bought a house in 2012 (the bottom of the market). Nevermind I cashed out my 401k after leaving my old job (and borrowed money from the in-laws) to buy it. (Note: I paid the in-laws back eventually.) So of course, I took my genius and thought I could do no wrong. Tesla was WAY overvalued (as it ALWAYS is). I bought out of the money puts on Tesla. And proceeded to lose my money. I don’t remember how much it was, but it wasn’t a lot (again, I love my wife and don’t want her to injure me).

For those of you who don’t know, buying a put gives you the right, but not the obligation, to sell a stock at a particular price. My buying Tesla puts was a bet that Tesla stock would go down. Oh what an idiot I was. Someone once said that the market can stay irrational longer than you can stay liquid. How true that is.

So, again fast forward to November 2021. I’m not sure what the catalyst was, but I decided to start selling options. Not buying, but selling options. I mean, is this a scam? Am I a bad person? How can I sleep at night taking people’s money? These are all thoughts I have now. I don’t feel good about it.

Money made in November 2021

The above was the money I made so far this year after discovering option selling (also called option writing). It’s not a lot. I’m not making millions. But my mortgage is $2250, so hey, not too bad! So why am I making money consistently? How does this work and why do I feel so bad about it?

That’s another blog post. :-)

But let me be clear about one thing: be VERY VERY CAREFUL trading options. You can lose your shirt! (and your house and your spouse and everything). My plan is to be very open about my gains. What about my loses? I’ll never have loses on options. That’s the crazy thing about all of this. I’ll have loses on stocks, but NEVER on options. Ok, maybe I’m being pedantic, but it’s a very important distinction to make.