How The Worst Trade Of My Life Cost Me $50K In A Day…

How The Worst Trade Of My Life Cost Me $50K In A Day…

Posted On August 29, 2022 2:58 pm

Dear Reader,

Some people ask me why I am so dedicated to NEVER making a naked trade, even when the trade appears to be a “sure thing.”

Well, let me tell you about the first “sure thing” trade I ever made.

I was 24 years old working on the CBOE as a market maker.

After a few months of lurking around I saw a “sure thing” that was going to dump $1,000 into my lap in just 24 hours.

Remember, a $1,000 profit in a day is nice these days…

But in 1989 it was a LOT of money.

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Anyway, United Airlines (UAL) was set to merge with Northwestern for around $200 a share. UAL stock had been trading around $190 for over a month.

The 150 put contracts, which expired the next day, were trading $1 or $100 per contract.

I sold 10 contracts and collected $1,000 in premium.

The whole time I was thinking to myself, “I can’t believe how easy this is! I’m gonna walk away with this $1,000 for doing nothing!”

The next day the merger deal was called off. UAL plummeted $100

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Now let’s do the math. I had 10 $150 put contracts at 100 shares per contract. That’s 1,000 shares I was on the hook for.

The stock was trading at $100 and the puts obligated me to pay $150 per share…

That means I lost $50 per share, or $50,000 overnight!

And why? Because I didn’t take a few dollars from the $1,000 premium I collected and buy some put options in order to protect myself.

It was, after all, a “sure thing.”

I’m here to tell you, there’s no such thing as a sure thing in the market.

That’s why the cardinal rule for myself and the Options360 community is…


They might sound like some fun in the bedroom, but in your trading account, they are a great way to lose big.

To Your Success…


P.S. I know this makes me sound like I’m an old fuddy-duddy…
But I’ve been trading full time for my living for decades. The meme stonk traders or home run chasers will be broke and out of the game in a year or so…
And Option360 members and I will still be living the traders life.
Discover how you can keep trading profitably, and learn to live the traders life with me in Options360.

About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.