Even though options are OT for this board, Saul mentioned to me that I should post my experience here.
This should serve as a reminder of why options are OT on this board.
Around 2009-2010 I started playing with buying some AAPL calls. I was following a newsletter by a very convincing writer named Jason Schwarz. The first year or two I would make a little and lose a little from time to time, yet as I watched AAPL stock over those first couple of years I began to believe that I could see a pattern (as did Jason Schwarz and other writers such as Andy Zaky)
So in 2012 I got serious about trading AAPL calls (buying at the bottom of the range - usually holding for the period up to and sometimes partially through earnings etc. - mitigating risk by selling at the tops of the current trading range.)
My story, however painful, could have been much worse (I will post some stories I have heard from Financial Industry insiders. While substantial to me, the amount of money could have been much larger.)
My Roth account then had gone from about 30k to maybe 12k through bad stock picking (I had not found Saul or the board yet). I started trading options seriously (using my whole account for that purpose) in the spring. At first I tripled my account in a few months but then I held through a swoon (probably around May, June) and was down to about 8k. Then after sticking it out through that downturn the account went up something like %700 in a couple of months (to 55k).
From that success I became so convinced that I knew what I was doing. My friends that I worked with said I was so arrogant about trading that I was unbearable to be around when that subject came up. Lol
So now, that I was doing so well instead of putting some money aside into safer investments, I decided to start trading my wife’s Roth with AAPL calls as well.
I think her account went up initially for a weeks as well. (from maybe 20k - 30k).
Then Apple stock began a long descent which lasted well over 6 months.
At the top I think the 2 accounts were worth close to $90k. I kept the faith because I had come back from swoons in AAPL stock before. Trading with Jason Schwarz we always kept some cash available but the problem is that if you keep losing over and over, it eventually becomes death by 1000 cuts.
The 2 accounts lost more than 70% of their value in 4 weeks and eventually after 4 more months each account had about $10 left (no I did not miss a zero). 2 accounts completely wiped out to basically nothing.
I even lost an additional 12k in another account, a regular trading account because I was so sure AAPL would come back (as an aside, luckily that same year in that acount I made about $12,000 from buying 100 shares of TSLA at 30 something dollars and selling them at $150 within months)
At the time, before switching to options, I had some NFLX stock in my wife’s account bought near the bottom of the Qwikster debacle (for those that remember). I also had some AAPL stock which I sold to buy options. NFLX stock is up a staggering amount since then and AAPL at least double from the top put in back then, not including dividends.
The reason I believe options are dangerous for readers of this board is because I believe anyone serious on this board is seeking alpha (significant alpha with reasonable expectations in my case). I worry about anyone new using options, I understand there are conservative ways to use options like selling covered calls etc, none of which interests me.
My friend in the financial business all his life (who lost 50k in options in a heartbeat and begged me to never get into them, who also told me to buy FB when it was like $16 agh!)
Anyway, before I finish this post I leave leave you with another story from my friend as food for thought.
He was working at one of these brokerage houses in 90s during the dot com bubble.
There was one account that everyone in the office would all look at every day because it was astonishing the money it was making.
A doctor (had to be a smart guy right? a Doctor!) Saul is / was a doctor if I remember correctly.
Rolled over his 401k worth $500,000 to this brokerage and started buying option calls on all the hot tech names: AMZN, and whatever else was soaring.
In 2 years the account was worth around $83,000,000!!! (Hard to believe right!? - True story)
At the end of the crash in 2000 he had $50,000 left.
I told this story to a guy who runs a gold hedge fund that gave us a tour of the CME.
He laughed and said he was impressed that the guy had $50,000 left in his account.
Thanks for listening to my story everybody,
If it helps even 1 person I will be happy.
Have a great day everybody!