After much research I decided to try my first Options trade and immediately lost money because I am an idiot (lessons learned)

by psychohistorian8

Maybe/hopefully this can be a lesson to other newbies

 

My very first trade was to go and sell a 3/12 Put (for .72 premium)

But since I was nervous about my first ever options trade I set buy/close triggers if I incurred 20% losses beyond what I earned (so, buy back if premium rose to .86), or if I could retain 75% profit (so, close it out at .18 premium)

 

Unfortunately, I almost immediately learned that I should have paid closer attention to bid-ask spread…

There were no Asks between .72 and my limit of .86, the next Ask was at 1.00

Which meant the buy trigger I set apparently saw that the price had ‘risen’ above my .86 setting and it bought the 1.00 Put to close the position

 

$28 gone before I could even finish my cup of coffee

After the initial confusion/shock/anger I’m glad it happened because it taught me I really need to triple check my trade as well as my exit plans (does it make sense logically, and technically) before I execute or I can inadvertently burn myself

Thank you for reading, and don’t do what I did

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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