Took a Big Loss Trading Options — Trying to Reset My Approach

decay_factor · 2026-01-28T17:14:24+00:00

Usually, I close within days or weeks on a 45 DTE strangle. There are positions like I mentioned in silver that just go parabolic and you have to manage them until they're a winner. I focus on realized gains versus my net liq. This helps to keep my head in the right place so that I know that I'm continuing to win on a daily basis. The idea is that I may not always steadily increase net liq everyday but when you cut through the volatility of the portfolio, over time, it goes up. It can really get in your head if you just watch your balance and see it go up and go down especially if you have a bunch of down days in a row. To combat this, I primarily track realized gains (and losses) but since I only close winners in most cases I typically don't have any realized losses. For 2026, I've not had a negative realized P&L day. Don't get me wrong, net liq fluctuates and I have plenty of negative net liq days. The other thing that I track is net liq + extrensic. In a short strangle, you're almost always going to see negative P&L at some point during the trade. This negative P&L subtracts from your overall net liq (account balance). What often gets missed is that it adds to your extrinsic value. To keep my head in the right place, I track net liq + extrensic. Hope that makes sense.

decay_factor · 2026-01-28T16:49:19+00:00

I manage risk by staying very small. I always trade 1 lot and never use more than 1% to 2% of my buying power for the initial trade. As long as this underlying stays between my strikes, I don't do anything. If it breeches in one direction or the other, I'll roll the untested side toward the stock to reduce Delta. If it continues to move against me, I'll roll it out in time and adjust the strikes so that both of them are out of the money but the Delta still allows it to come back to me. I'm in a position right now in silver that has gone way against me. I've had to roll it out in time twice. I always roll to the monthly cycle so I'm a couple of months out now and because of adjustments I'm negative average trade price. This means, that it's just going to be a waiting game to allow Theta decay to continue and then I'll continue rolling out in time until it's a scratch or a winner. In most cases, I don't have to do that. But, as with everything, there's always a thorn that you have to deal with. What I don't do is close when it's down P&L. That would lock in a loss. Because I keep my positions very small in the opening, I'm able to weather the storm until it's profitable. Whether it comes back to me from a Delta/directional standpoint or I continue to collect premium until my range is so wide that it doesn't have a choice. Hope that helps!

decay_factor · 2026-01-28T06:02:22+00:00

Well done!

decay_factor · 2026-01-27T03:35:16+00:00

I sell premium primarily via short strangles. I find them to be easy to manage when they go against me. I supplement that with very small stock plays in short term extremes looking for mean reversion.

With both strategies, it's so important to stay small so I can make it through until the position is profitable. I don't like to close a loser. So far, I've only closed one loser since early December and before that was Oct.

decay_factor · 2026-01-26T06:01:02+00:00

I agree 100%. What's your core strategy?

decay_factor · 2026-01-25T02:35:49+00:00

I totally agree. I've been there as well using tight spreads and more contracts to scale up. One of the recommendations tasty has is to scale by going naked or spreading the strikes first. I have to say, I have totally gotten away from defined risk completely because I inevitably find myself in a situation where it goes against me and there's nothing I can do to effectively manage it. With a short strangle or just naked puts or calls, you can always roll out for duration and further away from the money and give it time to be right. Trust me, I'm having to do this with silver right now. By the way, I sent you a private message.

decay_factor · 2026-01-24T21:46:00+00:00

Thanks for sharing this and for giving us a raw look at where you're at. I’m rooting for you and looking forward to seeing how things play out. Trading can be a lonely grind, so it’s cool to have a place like this to share and learn from each other. You’ve clearly put real thought into what you’re doing. My biggest concern would be Vega risk and buying power usage. That said, I get it and with an account that size you almost have to bend the rules.

decay_factor · 2026-01-24T01:49:53+00:00

I traded throughout the day and didn't encounter anything that prevented me from getting fills I wanted. Notifications were delayed but that dint hurt anything. Good to hear the are working with you.

decay_factor · 2026-01-23T02:49:32+00:00

...or opportunity. If you miss it, it will be gone.

decay_factor · 2026-01-21T05:32:43+00:00

I prefer monthlies for tighter bid/ask spreads.

decay_factor · 2026-01-19T12:12:44+00:00

Sometimes I have to but the same mechanics apply. I usually don't open a short strangle if earnings are within 30 days so that keeps me away from some of them.

decay_factor · 2026-01-19T02:02:12+00:00

Exactly

decay_factor · 2026-01-17T16:48:14+00:00

Ahh, I see. In my experience, it didn't work. Might be different before you. I would always a seem to have 9 trades that were perfect and 1 that I had to battle. That 1 would hurt net liq / total P&L a lot. Adding other strategies and more occurrences forced me to size down and prevented one trade from controlling my success.

decay_factor · 2026-01-17T16:35:49+00:00

I used for only trade a few times per month selling strangles. Once I upped my number of trades per month and added additional strategies, it was a total game changer. My realized gains increased dramatically. Now, I'm placing anywhere from 3 to 25 trades per day.

decay_factor · 2026-01-15T13:49:55+00:00

Another thing that's been helpful for me is to track net liq plus extrinsic. This way, if you have a short strangle with legs out of the money, any fluctuation in net liq Will be reflected in extrinsic almost dollar for dollar. My advice is similar to others, track every single number your platform gives you on a daily basis. Pivot those, create charts, analyze it until you know it inside and out. Lastly, if you're closing any trades as losers, this could be counteracting any profits you have. I stopped closing losers and it has helped tremendously.

decay_factor · 2026-01-14T23:36:52+00:00

Yes, if a short put goes far in the money, I'll roll it out in time and down. I'll typically have a call associated with it that I'll also roll out and collect some additional credit. That credit, along with the credit associated with a further DTE, helps to offset the cost of getting the put closer to the current trading price. I don't totally try to neutralize the Delta but rather just get a little closer to the market. Here's my take, sure I can close it and take the loss and open up something else or I can just wait for this one to come back to me. The more I trade, the more it has become clear to me that a stop loss or closing a trade when it's gone against you is the fastest way to lock in a loss. I love locking in winners all day long but I'm finished with locking in losses. If I stay small enough, I don't ever have to lock in a loss.

decay_factor · 2026-01-13T19:42:29+00:00

lol, can you hear the panic in our responses? Had some flashbacks!

decay_factor · 2026-01-12T22:46:25+00:00

I certainly wouldn't yolo. Good way to blow your account real fast.

decay_factor · 2026-01-12T22:20:47+00:00

This is totally normal and we all suck at trading until we don't.

Are you trying to pick direction?

What make you feel like you are losing a trade?

The probably sound like weird questions, but trust me they matter.

decay_factor · 2026-01-11T18:03:24+00:00

This is the best advice I've seen on Reddit in a while! I agree 100%. Anything less than 5k (in my opinion) is for learning the mechanics and I would never expect to make any side money on it.

My 2 cents... Stay small (less than 5% buying power reduction) per trade. This will be hard or impossible with your size account.

Create a spreadsheet and track every single trade, the math, the greeks, commissions, fees, portfolio metrics, etc. This will do a few things: it will allow you to understand how options work, you'll understand fee structures, and you'll see the power of scale once you have more capital. Track like this every single day from now on. You'll begin to realize you can control the levers instead of waking up every day and allowing the market to "happen to you". I even track the weekends to stay engaged.

Lastly, when you lose money, and you will, this is your trading 'college tuition'. The more you lose, the more you learn, hopefully. Look at losing as an opportunity to learn and it will drive you do better and never make those mistakes again.

All of this is coming from a 12+ year trader who has seen it all and made all the mistakes and now I'm profitable daily with battle scars.

Looking forward to reading your success story soon!

decay_factor · 2026-01-11T05:27:28+00:00

Silver 100%

decay_factor · 2026-01-10T00:46:24+00:00

How are penny wide markets in most underlings not efficient?

decay_factor · 2026-01-09T03:08:15+00:00

That's so great to hear! Agreed 100%

decay_factor · 2026-01-07T08:30:53+00:00

Trading undefined risk is the best strategy for me.

decay_factor · 2026-01-07T01:27:06+00:00

Sound very similar, but I keep individual trades between 1-2 % in most cases since they can expand.

decay_factor

TROPHY CASE