Options Trading Mistakes
Nine ways accounts die — and the fix for each one.
The options trading mistakes that actually empty accounts are not exotic. They are the same nine, over and over: no written exit, cheap out-of-the-money contracts, oversized positions, undefined risk, illiquid contracts, adding to losers, letting winners round-trip, revenge trading, and never debriefing. Every one of them is a discipline failure, not a knowledge failure.
In aviation, every mishap gets investigated. Not to assign blame — to find the causal chain and make sure the next guy does not fly into it. We did it after every single flight, win or lose, sitting in a room going through what happened and why.
Almost nobody does that with their trading account. They take the loss, feel bad for an afternoon, and go find another trade. Which is precisely why the same options trading mistakes keep showing up in the same accounts for years.
Here is the debrief. Nine mistakes, in the order they cost the most money.
Thirty tactics, one page each — max profit, max risk, break-even and exit criteria written down before you enter. Plus the 7-Step Trade Plan. Free.
Send Me The Checklist1. No Written Exit Before Entry
This is the parent of most other options trading mistakes. Everything below is downstream of it.
Fighter pilots do not brief contingencies in the air. We brief them on the ground — before the flight, when nothing is happening and nobody is under pressure. What happens if the weather closes in. What happens if we lose an engine. Decided in advance, so that in the moment you execute a decision instead of making one.
A trader without a written exit is deciding under pressure with money on the line, which is when human beings are at their absolute worst. That is not a character flaw. It is physiology.
Before the order goes in, write down three things: your target, your commit criteria — what has to be true for you to take this at all — and your exit, both the good one and the bad one. If you cannot write them, you do not have a trade. You have an opinion.
2. Buying Cheap Out-Of-The-Money Contracts
A contract forty dollars out of the money costs almost nothing. That is exactly the problem — it is cheap because the market has priced the odds of it paying, and those odds are bad.
Beginners buy them because the ticket price fits the account. Then the stock moves in their favor, they are still wrong, and the position goes to zero anyway because it never crossed the strike before the clock ran out. Being right about direction and still losing everything is the most demoralizing of the options trading mistakes, and it is entirely avoidable.
Stop buying lottery tickets and start buying defined-risk spreads. A bull call spread gets you the same directional view with a lower break-even, because the contract you sell pays for part of the one you buy. You give up the fantasy of a hundred-bagger. You gain a trade that can actually work.
3. Position Size Set By Hope
Ask most retail traders how they sized a position and the honest answer is “it felt about right,” or worse, “that is what I had left.”
Sizing is where the options trading mistakes compound, because it multiplies every other error on this page. The professional version runs backwards. You start from the maximum loss — the number you have already accepted losing on this trade — and size the position to fit it. Max loss first, then the trade. Not the other way around.
Pigs get slaughtered. The trade that finally kills an account is almost never a bad idea. It is a decent idea in size that had no business being that large, taken by somebody who was up on the month and feeling clever.
4. Selling Undefined Risk
Selling contracts feels wonderful. The premium lands in the account immediately and, most of the time, nothing bad happens. That is what makes it dangerous — it pays you repeatedly for a habit that is quietly building an obligation you cannot cover.
A naked short call has theoretically unlimited risk above it. A naked short put can force you to buy 100 shares of something in free fall. Of all the options trading mistakes on this page, this is the only one that can take more than the account holds.
Never sell a leg without another contract capping the damage behind it. That is what turns naked selling into a bull put spread — same income, known ceiling on the loss. Or sell against stock you already own, which is a covered call.
5. Trading Illiquid Contracts
This is the quietest of the options trading mistakes, because it never announces itself. Look at the bid-ask spread before you look at anything else. If a contract is bid $1.10 and offered $1.60, you are down roughly twenty percent the instant you fill — and you will pay that spread again on the way out.
Thin contracts also trap you. When the position moves against you and you need out, there may be nobody on the other side at a price you can accept. Your exit plan is worthless if the exit does not exist.
Trade contracts with tight spreads and real open interest. Large-cap names and major indices. If the spread is wider than about ten percent of the contract price, walk away — there is always another trade.
6. Adding To A Loser
Averaging down works, sometimes, when you own stock. A share of a good company at a lower price is a better deal, and you can wait.
Options have an expiration date. You cannot wait. Adding to a losing contract is buying more of a position whose central premise — the move happens before the clock runs out — is already being disproven in front of you. You are not getting a discount. You are increasing your bet on a thesis the market is actively rejecting.
On a credit position, when the cost to close reaches twice the credit you took in, treat it exactly like a caution light illuminating in the cockpit. It is a decision point that demands your attention — not an automatic eject.
You look at it. Has the thesis broken, or is this noise? Is there a defensible adjustment? Has something changed that you did not know at entry? Then you decide, deliberately. Warning lights get evaluated, not obeyed blindly — and they do not get ignored either.
7. Letting A Winner Round-Trip
Most lists of options trading mistakes only cover losses. This one costs you wins. A position goes green. It is up sixty percent of what it could make. The trader holds out for the last forty, the market turns, and it closes flat or red.
That last slice of profit is the most expensive money on the board. You are risking real, banked, unrealized gains to chase a diminishing remainder, and the odds get worse the closer you get to maximum.
Scale out on a rule, not a feeling. Take pieces at 70, 80 and 90 percent of maximum profit. You will occasionally leave a little on the table. You will stop turning winners into losers, which costs far more over a year.
8. Revenge Trading
You take a loss. Something in you wants it back, and wants it back now, from the same ticker that just took it. So the next position goes on bigger, faster, and with none of the criteria the first one had.
This is greed and fear doing exactly what they do, and it turns one of the smaller options trading mistakes into a catastrophic one — the point where a bad trade becomes a bad week. The market does not know you lost money and has no mechanism to give it back.
After a full-size loss, no new positions the rest of the session. A hard rule, decided in advance, when you were calm. Same principle as every other item on this list — the decision gets made on the ground, not in the air.
9. Never Debriefing
The one that guarantees all the others repeat.
We debriefed every flight. Not the bad ones — every one. Because a flight that went well by luck teaches you something different than a flight that went well by execution, and if you never look, you cannot tell which one you just had.
A trader who does not debrief has no idea whether last month’s profit came from process or from a friendly tape. So when the tape turns, they have nothing to fall back on.
Every closed position gets four lines: what I expected, what happened, why the difference, what I do differently. Ten minutes a week. It is the single highest-return habit in this entire article and it costs nothing.
The Nine, At A Glance
Every one of the options trading mistakes above, with its correction, in a form you can keep next to the screen.
| Mistake | The Fix |
|---|---|
| No written exit | Target, commit criteria and exit — on paper, before entry |
| Cheap OTM contracts | Defined-risk spreads instead of lottery tickets |
| Sizing by hope | Max loss first, then size the position to fit it |
| Undefined risk | Never sell a leg without one capping it behind |
| Illiquid contracts | Tight spreads, real open interest, liquid names |
| Adding to losers | 2× the credit is a warning light — evaluate, then decide |
| Winners round-tripping | Scale out at 70 / 80 / 90 percent of max |
| Revenge trading | Full-size loss ends the session. No exceptions |
| No debrief | Four lines on every closed position, every week |
In the cockpit you are Pilot In Command. Nobody else is flying the jet, and nobody is coming to take the controls. In the market you are Trader In Command — nobody else is managing your position, and nobody is coming to close it for you.
Read that list again with that in mind. Not one of those nine options trading mistakes is caused by a lack of information. Every one is a decision made in the moment that should have been made in advance.
Where To Go From Here
Most of these options trading mistakes come from building a position before understanding what is under it. If any of the above was unfamiliar, start with the mechanics and work forward:
The full free library sits on the Learn Options Trading page, including how we brief a position from strategic down to tactical before anything gets executed.
Common Questions
What percentage of options traders lose money?
You will see numbers like 90% quoted everywhere, and none of them trace back to a study worth citing. Brokers do not publish it and the figures that circulate are marketing. What I can tell you from twenty-five years is that the split has far less to do with the instrument than with whether somebody writes an exit down before they enter. The options trading mistakes on this page are the difference, not the product.
Which mistake costs beginners the most?
Number two, by a wide margin — buying cheap out-of-the-money contracts. It is attractive precisely because it is affordable, it produces a total loss more often than any other position, and it teaches exactly the wrong lesson, because the trader concludes options do not work rather than that the position was badly built.
Do experienced traders make different mistakes?
Different weighting, same list — experience changes which of the options trading mistakes gets you, not whether one does. Beginners die on numbers two and three. Experienced traders die on four and seven — selling undefined risk because it has paid for years, and holding winners too long because they have watched a few run. The account is bigger, so the damage is worse.
How do I stop repeating the same mistake?
Debrief in writing. Not mentally — in writing. Nearly all repeated options trading mistakes survive because the trader never wrote the last one down. Almost everybody who thinks they have already learned from a loss has just felt bad about it, which is a different thing and does not change behavior. Four lines on every closed position, reviewed weekly, will surface your personal pattern inside a month.
Options Weapons School is the nine-session build — the same block-by-block method used to train fighter pilots, applied to options. Knowing the options trading mistakes is not the same as having the procedure that prevents them. Every discipline on this page gets drilled until it is procedure instead of good intention.
See Options Weapons School Or Go Full ThrottleWhat side are you on?”
President, No Fallen Heroes Foundation | Founder, Sacred Warrior Fellowship
