27-year-old lost $80,000 of his savings trading stock options: I was 'devastated'

CNBC

24-04-2025

While many investors may have gotten nervous watching the stock market plummet and bounce back amid President Donald Trump's recent tariff announcements, some may have seen an opportunity.
Paul fell into the latter camp.
In early April, the 27-year-old saw news of upcoming auto tariffs and believed it would send stock prices down for major carmakers like Tesla. He thought he could make some money on that movement, he told self-made millionaire Ramit Sethi in an episode of his "Money for Couples" podcast, which was recorded live on April 8. Paul and his wife Vicki's last names were not used.
Paul was initially successful, earning around $4,000 trading Tesla options, he said. But then his "obsession" with making more tempted him to place an even bigger bet, and he woke up the next day to an $80,000 loss, he said.
Options are contracts that give an investor the option of buying or selling an asset, like a stock, at a certain time and price point. It's considered a riskier investment strategy than buying and holding stocks because it's speculative and relies on the investor timing the market — which even the most seasoned investors can't do with perfect precision.
"I thought I had enough information to make the right choice with the money that we had in our brokerage account and it ended up not being the right choice," Paul said.
He started options trading in 2021, and said he is currently "in the red" on that front. "If I were to put all the money that I lost into an index fund, we would be sitting really really pretty," he said.
The couple earns $169,000 a year and the $80,000 Paul lost came from their emergency savings. They still have $110,000 in their retirement accounts and $23,000 left in their emergency savings after Paul's recent loss.
The couple's situation illustrates why a "boring" investing strategy makes sense for most people, Sethi said.
As Paul knows, options trading can come with a major payoff, but not without taking on significant risks.
"Options trading can be incredibly risky for casual investors because it often requires a deep understanding of market mechanics, volatility and timing," says Douglas Boneparth, a certified financial planner and founder of Bone Fide Wealth. "Unlike simply owning a stock, options are leveraged instruments. This means small moves in the market can have outsized consequences, both gains and losses."
This isn't the first time Paul has lost a significant amount of money on options trading, he said. He enjoys it for the income potential — he made $80,000 in about three months when he was first starting out in 2021, he said — and the rush he gets from seeing his money move around. But waking up to his recent loss "devastated" him, he said.
"For most retail investors, options trading is not a good strategy," Boneparth says. "It's often misunderstood, and many people treat it like a lottery ticket or a quick-win gamble. In reality, successful options trading requires discipline, experience, and often, access to tools and data."
Investing should be boring for most people, Sethi said on the podcast. That often means setting up automatic contributions to investment accounts and utilizing passive strategies like index funds, which offer automatic diversification.
Passive investing strategies are often cheaper than active strategies because they typically have lower fees. They also regularly outperform actively managed portfolios, according to research from S&P Dow Jones Indices.
Sethi has witnessed this firsthand with the couples he interviews. "By the time [investors] are talking to me, they've probably lost a lot of money in active trading," Sethi said. "Meanwhile, their passive trading is crushing it."
For Paul, losing $80,000 was a turning point, he told Sethi. He acknowledged he needed to stop options trading altogether, something he's said in the past as well.
Losing that money felt like losing "the feeling of freedom" it offered as an emergency fund, Paul's wife Vicki said. "With the loss of that comes the loss of security, not just in the betrayal of trust, but the loss of that [safety net]," she said.