Lost a bunch in options trading? Trust me, you’re not alone. In fact, if you haven’t yet tasted the sting of a losing trade in options, you’re either brand new or one of the rare unicorns who doesn’t blink when markets swing like a wrecking ball.
Recovering from losses in options trading isn’t just about tactics — it’s about mindset, discipline, and strategy. So, let’s pull back the curtain and talk real strategies that can help you bounce back, regroup, and maybe even come out stronger.
This guide is long, raw, and straight from the trenches. Ready? Let’s do this.
What Is Option Trading And Why Do People Lose Money?
Options trading sounds sexy — high rewards, flexible strategies, leverage. But behind the shiny surface lurks complexity. And that’s where many traders slip up.
In simple terms, options are contracts that give you the right (but not the obligation) to buy or sell an asset at a certain price within a timeframe. Sounds simple? Sure. But throw in time decay, volatility, market swings, and poor planning, and it becomes a financial minefield.
So, why do people lose?
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Overleveraging: Betting big hoping to win bigger.
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No strategy: Trading on gut feeling instead of a plan.
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Greed and fear: Chasing profits, cutting winners too early, letting losers run.
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Lack of understanding: Not fully grasping how options work (e.g., Greeks, volatility, theta decay).
First Step: Accept The Loss Without Excuses
Let’s be honest — losing sucks. But denial is even worse.
If you’re still blaming the market, the news, or your broker… stop. Own the loss. Accepting it is the first step toward learning and recovering. Treat your losses like tuition in the school of trading.
Do a Post-Mortem: Where Did It All Go Wrong?
Grab a notebook or spreadsheet. Now write down everything about your trade:
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What was the strategy?
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Why did you enter?
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Where was your stop loss?
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What was your exit plan?
Chances are, you’ll find cracks in your foundation — maybe it was poor timing, maybe emotions took over, or maybe you simply didn’t understand the position you took.
This painful self-audit is your blueprint to improvement.
Don’t Chase Losses — That’s A Trap
Ever tried to double your next trade to “win it back”? That’s revenge trading. And it’s a one-way ticket to blowing your account.
Here’s the deal: the market doesn’t owe you anything. The more you chase, the faster you fall. Instead, pause. Recalibrate. Come back with a clear head.
Start Trading Smaller (Like, Way Smaller)
When you’re in recovery mode, your capital and your confidence are fragile. Now is not the time to be bold.
Cut your trade size in half. Heck, even trade one contract if you must. Think of it like going back to the gym after an injury — you wouldn’t start with your max weight, right?
Switch To High-Probability Trades
Not all trades are created equal.
After a loss, focus on strategies with a higher probability of success:
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Credit spreads: Like bull put or bear call spreads.
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Iron condors: When markets are flat.
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Covered calls: If you own the stock.
These might not deliver home-run returns, but they’re great for rebuilding your confidence and consistency.
Keep a Trading Journal (Yes, Seriously)
You’d be shocked at how many traders don’t do this.
A journal isn’t just for tracking wins and losses — it’s a mirror that shows you patterns you can’t see in the moment. Note:
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Entry and exit points
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Emotions during the trade
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What worked and what didn’t
Review it weekly. You’ll start seeing what needs to change.
Backtest Before You Trade Live Again
You wouldn’t fly a plane without a simulator, right? So why trade live without backtesting?
Use platforms like ThinkOrSwim or TradingView to test your strategy over past market data. This lets you tweak your system and build confidence without risking a dime.
Master Risk Management — Or Don’t Bother Trading
This might sound harsh, but it’s true.
Without a solid risk plan, you’re gambling — not trading. Set strict rules:
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Only risk 1-2% of your capital per trade
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Have a max daily loss limit
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Use stop losses religiously
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Position size appropriately
Treat your capital like a soldier in battle — protect it at all costs.
Use the Greeks to Your Advantage
If you don’t understand Delta, Theta, Vega, and Gamma — you’re trading blind.
These Greek letters tell you how your option reacts to:
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Price movement (Delta)
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Time decay (Theta)
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Volatility changes (Vega)
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Rate of change in Delta (Gamma)
Ignoring them is like driving without a dashboard.
Shift to Monthly or Weekly Income Strategies
Tired of guessing market direction?
Then stop playing that game. Shift to income-generating strategies like:
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Selling weekly puts on stocks you want to own
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Running covered calls on long positions
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Using calendar spreads to profit from time decay
These strategies focus more on probability and less on speculation.
Re-Educate Yourself — Never Stop Learning
Let’s be real. The market evolves. Strategies that worked last year may flop this year.
So you need to stay sharp:
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Read trading books regularly.
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Watch webinars.
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Follow experienced traders.
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Join forums and groups — but be picky.
The moment you think you “know enough” is the moment the market humbles you again.
Practice Mindfulness And Emotional Discipline
Losses sting not just financially, but emotionally. That emotional toll can cloud judgment.
Try this:
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Take breaks often — step away from screens.
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Meditate for clarity.
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Don’t trade when stressed, angry, or desperate.
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Talk to other traders (you’ll realize you’re not alone).
Emotions are your biggest enemy in trading. Learn to tame them.
Rebuild Your Trading Plan From Scratch
If your past strategy led to heavy losses, why keep using it?
Start over. Build a plan that includes:
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Entry/exit rules
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Position sizing
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Strategy types
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Emotional checklists
Make it your trading Bible. And follow it — no exceptions.
Understand That Recovery Takes Time
You’re not going to recover all your losses in one week. Maybe not even in one month.
That’s okay.
Recovering is like dieting after binge eating for months. It’s slow, boring, and requires patience — but the long-term rewards are worth it.
Set realistic goals:
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Monthly performance targets
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Trade frequency limits
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Personal development milestones
Find A Trading Mentor Or Accountability Partner
Flying solo is tough. Having someone to review your trades or slap your wrist when you’re getting greedy? Invaluable.
Look for:
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Forums with seasoned traders
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Coaching programs (but vet them hard)
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Discord groups with real-time feedback
Don’t just follow anyone with a flashy Instagram and a Lambo. Look for substance.
Don’t Try to Predict — React Instead
Most traders try to forecast the future. Instead, focus on reacting to what’s happening now.
This means:
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Letting price action confirm your setups.
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Using indicators as confirmation, not gospel.
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Avoiding trades that don’t meet your criteria.
Be a sniper, not a machine gun.
Automate Where You Can
Human error is real — and dangerous. Automating helps:
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Set stop losses in advance.
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Use OCO (One Cancels the Other) orders.
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Automate alerts and backtesting.
Let technology reduce your chances of messing up.
Consider Taking a Break From Live Trading
Sometimes, the best recovery plan is to pause.
Go back to paper trading. Work on your psychology. Analyze charts without any pressure.
This “cooling-off period” could save you from digging a deeper hole.
Don’t Measure Success By Wins Alone
It’s easy to get obsessed with winning percentage. But a trader with a 40% win rate can be more profitable than one with 70% — if their losses are small and wins are big.
Focus on risk-to-reward ratio, consistency, and discipline.
Conclusion: Trade Smarter, Not Harder
Recovering from losses in option trading is possible — but only if you face the truth. It’s not about doubling down or “getting lucky.” It’s about rebuilding — smarter, slower, and with intent.
Don’t let one (or many) losses define your trading future. Every successful trader has taken gut-punch losses. What separates them is how they responded.
So breathe. Learn. Adjust. And step back into the market with your head held high — and a better plan in place.
FAQs:
1. Can I recover my losses from options trading quickly?
Not realistically. Quick recoveries often involve high risk, which usually leads to more losses. Take your time and focus on consistency over speed.
2. Should I stop trading after big losses?
Yes, at least temporarily. A break allows you to clear your head, review mistakes, and prevent emotional trading.
3. What’s the safest options strategy after a loss?
Covered calls and credit spreads are generally safer, lower-risk strategies to rebuild slowly and steadily.
4. How do I manage emotions after a trading loss?
Acknowledge the emotion, but don’t let it control you. Use journaling, meditation, and community support to process and move forward.
5. Is hiring a trading coach worth it?
It can be, but vet them carefully. Look for someone with proven experience and a teaching style that fits you — not someone selling dreams.