Is it just me, or is the win rate for options buying hard to stomach?

Trader reviewing trading charts

Taking losses is very difficult for all new options traders to accept at first, including us! As kids in school, we all learn that in order to be considered successful, we need to get 95% of the questions correct and earn an A. As it turns out, when it comes to options buying, this is simply not the case. In fact, with options buying, the percentage of winning trades required to be successful is more like a baseball batting average. You can have an incredibly profitable options portfolio with only a 35% winning percentage.

We all had trouble taking even ONE loser, but when it comes to options buying, the odds are high that you can see numerous losers in a row. In fact, our Quantitative Analysis department has determined that out of a 50-trade period, with a 40% win rate, there is a 51.7% chance of having eight losers in a row. We don't care who you are: losing eight times in a row can do a number in your psyche, especially if you're new to options trading. But, in the bigger picture, such a streak is not statistically abnormal.

Eventually, we all were able to become more comfortable with taking losses. We still don't enjoy chalking up losing trades, but thanks to the leverage that buying options provides, we've come to realize that it only takes a few big winners to more than make up for our inevitable losing trades, and allow us to be profitable in the long-run.


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