Selling options is often billed as the “safer” way to trade:
- Higher win rates.
- Consistent premium.
- Income-focused strategies.
But there’s a problem most traders don’t fully understand: "Selling options is like picking up pennies in front of a steamroller." Maybe you’ve heard the cliché, but don't realize how fast that steamroller moves until it’s too late.
Rick Orford’s latest breakdown for our Barchart YouTube channel reveals the "Fatal Mistake" that wipes out retail accounts: confusing a high win rate with low risk.
The Difference Most Traders Miss
When you buy options, your risk is defined upfront.
For example:
- Buy a call on SPY for $1,500
- Worst-case scenario → you lose $1,500
You can be wrong; the market can crater; and you only lose that $1,500.
That’s it. No surprises.
But when you sell options, the structure changes completely. You collect a smaller premium… and take on a much larger obligation.
In the example from the video:
- Sell a SPY put → collect about $1,073
- If assigned → you must buy $68,600 worth of SPY
That’s the difference: You aren't just "collecting a check" — you are signing a contract to potentially buy $68,600 of shares.
How One Trade Becomes a Big Problem
This is where many traders get into trouble. They think in terms of “premium collected” instead of “total risk exposure.”
Sell 3 contracts?
- Premium collected → about $3,000
- Actual risk exposure → over $200,000
If the trade moves against you, that means you’re not managing a small loss. You’re managing a large position you may not have planned for.
The Illusion of High Win Rates
Selling options often produces a high percentage of winning trades. But that doesn’t mean the strategy is low risk.
It means the losses are:
- less frequent
- but significantly larger
As Rick explains: High win rate ≠ small risk. It often just means the risk is hidden — until it shows up.
Using Barchart to Manage Risk
Instead of guessing at your exposure, Barchart tools can help you evaluate trades before entering.
With the Options Screener, you can:
- View maximum loss and risk-defined setups
- Compare premium vs exposure
- Filter by liquidity and open interest
You can also use:
- Barchart Opinion → confirm trend strength
- Options P&L Chart → evaluate probability and structure
- Options Strategies → find alternatives like credit spreads
The Real Goal: Survival
Selling options can be a powerful strategy.
But it requires:
- discipline
- risk awareness
- proper position sizing
Because in the long run, the goal isn’t just profit. It’s survival.
Watch this quick clip on Selling Options:
- Stream the full video explainer from options expert Rick Orford
- Analyze trades using Barchart’s Options P&L Charts
