Home
/
Avoid Mistakes
/
Common Options Trading Mistakes to Avoid

Common Options Trading Mistakes to Avoid

Learn the most common options trading mistakes that destroy accounts and how to avoid them. Save thousands by learning from others' errors.

Risk Management

Capital Protection

Must Read

Last Updated: November 21, 2025

15 min read

Reviewed by: ApexVol Trading Team

Fact-checked & Up-to-date

⚠️

Why This Matters

Options trading mistakes often stem from improper risk management, misunderstanding Greeks, and emotional decision-making. Understanding common pitfalls helps traders develop discipline and avoid costly errors that can wipe out months of gains in a single trade.

Overleveraging / Position Too Large

critical

Risking more than 2-5% of your account on a single trade. One bad trade can wipe out months of gains or blow up your account entirely.

✅ Solution

Limit position size to 1-2% of account value. Use defined-risk strategies like spreads. Never put more than 5% total in any single underlying.

📋 Real Example

Trader puts 20% of $10K account into weekly calls. Stock drops 5%, options lose 80%. $1,600 loss in one trade - 16% of account gone.

Ignoring Implied Volatility

critical

Buying options when IV is elevated, only to suffer IV crush even when direction is correct. Many traders focus only on price and ignore volatility.

✅ Solution

Always check IV rank before buying. Buy options when IV is low, sell options when IV is high. Use spreads to reduce vega risk.

📋 Real Example

Buy TSLA calls before earnings at 80% IV rank. Stock goes up 3%, but IV drops 50%, option loses 30% despite being right on direction.

No Exit Plan

high

Entering trades without predetermined profit targets and stop losses. Leads to holding losers too long and cutting winners too early.

✅ Solution

Before every trade, define: profit target (50-75% of max), max loss (100-200% of premium), and time stop (close at 50% time remaining).

📋 Real Example

Trader buys calls, stock drops 10%. 'It'll come back.' Stock drops another 10%. Option expires worthless. Never had a stop loss.

Trading Without Understanding Greeks

high

Not understanding how delta, theta, vega, and gamma affect option prices. Leads to surprise losses and poor strategy selection.

✅ Solution

Learn the Greeks before trading real money. Understand how each Greek affects your position. Use our Greeks Heatmap to visualize exposure.

📋 Real Example

Trader sells ATM straddle not understanding gamma risk. Stock moves 3%, position loses 15% due to accelerating delta exposure.

Buying OTM Options (Lottery Tickets)

medium

Repeatedly buying cheap OTM options hoping for a big win. While occasionally successful, the probability is against you and losses compound.

✅ Solution

Buy ATM or slightly OTM options for directional trades. Consider spreads to reduce cost. Reserve lottery tickets for 1-2% of account max.

📋 Real Example

Trader spends $200/week on OTM weekly calls for 6 months. Total spent: $4,800. Total wins: $600. Net loss: $4,200.

✅ Prevention Checklist

Never risk more than 2% per trade

Check IV rank before every trade

Have an exit plan before entering

Use defined-risk strategies for 80%+ of trades

Understand your Greeks exposure

Size positions for worst-case scenario

Review and journal every trade

Frequently Asked Questions

What is the biggest mistake options traders make?

The biggest mistake is overleveraging - risking too much on a single trade. Even experienced traders can have losing streaks. Risking more than 2-5% per trade means a few bad trades can devastate your account. Position sizing is more important than strategy selection.

Why do most options traders lose money?

Most options traders lose money due to: 1) Overleveraging and poor position sizing, 2) Buying options when IV is high (paying too much), 3) No exit plan leading to holding losers, 4) Not understanding Greeks and how options behave, 5) Emotional trading and revenge trading after losses.