Quit.
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How to recover from a huge loss?
- Thread starter kj5159
- Start date
Quit.
Can you give us some more details on the exact series of events.
Did you hold the position to expiration?
What broker do you use?
After being assigned did you get auto liquidated or did you decide to exit the position?
As some others have stated, I'm curious how the option being exercised could result in such a large loss since the wings can be exercised as well.
I didn't think to do that, but I'm an idiot and that's what I should have done. I appreciate that question as now I know.
I dare not surrender.Quit.
What will it take for you to quit?I dare not surrender.
This is is now turning into a very expensive hobby...
Sorry to hear this but how did you manage to lose 70% of your account on one trade? What were you trading? Thanks.I have lost over 70% of my account on one trade. About $70000, and all my net worth was in the account. I stopped trading, became depressed for a week, near suicidal which isn't good when you have an apartment on the 8th floor.
My advice, stop trading until you feel happy and stable again. You have to move on and try to focus on the good things in your life. If you are supposed to make it in trading you will come back and view it as trading tuition.
Try to learn something from the experience, at least you will get something out of it.
Thks, awesome advice. I take it that if I stick to just buying options and just vertical debit spreads then I can't lose more than the premium paid? So I know my risk from the onset?I am genuinely sorry to hear you took such a large loss. When you are trading options you always need to look at the notional value of your option positions. It is easy to look at the debits/credits of the options you are putting on and not realize how much notional value exposure you are carrying with all of those positions.
To keep it from happening again you need to not over-leverage and also stay diversified. If you are willing to lever 2x max (notional of option positions vs. portfolio equity), then stick to that. And then spread that 2x out over many positions and strategies. Maybe have positions in 8 different underlying using no more than 0.25x leverage of your portfolio for each, and then diversify through strategies as well by having some spreads, butterfly's, ICs, etc. If you do that you will not have 30% of your account wiped out, not even close, even on your worst day.
As far as crawling back to even, if it were me I would get back on the horse again with my new rules (the rules to keep you from over-risking like this again), and start depositing money in from my regular income to get back to even. Consider it your new lease on life and be glad you didn't blow an amount much larger than 30%.
Averaging down in a big drop and being overleveraged in ES futures.Sorry to hear this but how did you manage to lose 70% of your account on one trade? What were you trading? Thanks.
K
krugman25
Yes, that should be the case.Thks, awesome advice. I take it that if I stick to just buying options and just vertical debit spreads then I can't lose more than the premium paid? So I know my risk from the onset?
Thks, awesome advice. I take it that if I stick to just buying options and just vertical debit spreads then I can't lose more than the premium paid? So I know my risk from the onset?
Couple cases I can think of where it goes wrong
1. Before expiration, you get exercised on the short strike and the broker liquidates the stock due to insufficient margin. You could experience large pnl from the open option legs.
2. The options expire with underlying between the vertical strikes. You get exercised on the ITM option and there is a gap in the underlying price.
Thanks for replying. I agree with you that vertical debit spreads cannot be considered 100% defined risk. In a different forum I brought up the point you made at 2 about gaps but could not get a definitive answer. However, I do believe that this is a real risk and, for that reason, it is wrong for people to say that spreads have defined risk.Couple cases I can think of where it goes wrong
1. Before expiration, you get exercised on the short strike and the broker liquidates the stock due to insufficient margin. You could experience large pnl from the open option legs.
2. The options expire with underlying between the vertical strikes. You get exercised on the ITM option and there is a gap in the underlying price.
The only options with defined risks are simple buys of calls and puts.