Options Trading: Brought me to the moon, and crashed back down


You might have noticed that Kaya Plus does not publish stuff actively lately. At least public stuff.

Out of the many things that I do and juggle, writing public readable posts provides Kaya Plus the least return. Only traffic if we write the right stuff.

There are no ads. And we don’t see ourselves writing daily on hot topics just for the sake of traffic.

And I have better avenues to generate returns. Or so I thought.

Dabbling into options

It was around August 2023 last year when I started out experimenting with options. Pretty simple straightforward out-of-the-money calls and puts.

As I slowly built up confidence and wins, my appetite and greed grew.

My first lesson was selling a naked call option, where the underlying stock eventually went against me in a frenzied rally.

It was a 5 figure loss. And I was distraught.

My wrong lesson learnt from selling a naked call

And so I thought, well let me just sell cash or margin-secured puts then.

Surely that can help me avoid stocks mooning and getting minced by selling a naked call option.

So wrong, so so wrong.

Margin is bestowed based on our portfolio size. All platforms will have a liquidity indicator.

If you put in too many trades on margin versus your overall cash-secured portfolio, you risk margin call.

However, if your cash-secured portfolio valuation reduces, it will too decimate the liquidity indicator and trigger a margin call.

And back then with my portfolio growing due to the AI spurt, I unconsciously put on more option trades.

The true lesson learnt

On the morning of 20th April, I woke up uneasy. I was still reeling from the in-the-money naked put options that I rolled forward.

When my portfolio’s semiconductor and AI stocks suffered a valuation drop, it triggered a margin call.

For IBKR, stocks will be forced to sell to ensure no breach in margin cushioning.

At that moment, I knew the greed for collecting out of the money premium had got the better of me, and that positions that I had painstakingly built over the years via value and growth investing were affected.

I got so sick of it, that I am so ready to quit this greed game and just focus on building wealth slowly and steadily.

Lessons learnt the hard way stick to you the hardest

The funny thing is, it’s not that lessons and words of wisdom are not available.

We sometimes do take things for granted. Warren Buffett did mentioned “If you are smart, you’re going to make a lot of money without borrowing.

Guess greed got me this round, a mistake that I hope would be as easy as turning back the clock.

My honest and sincere advice: If you want to trade options, just make sure that you can survive the worst-case scenario of a margin call.

The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities,
or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities, or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
No warranty is made with respect to the accuracy, adequacy, reliability, suitability, applicability, or completeness of the information contained. The author disclaims any reward or responsibility for any gains or losses arising from the direct and indirect use & application of any contents of the article/report/written material

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