Day Trader Options Frenzy Turns Ugly in $730 Billion Nasdaq Rout

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While it’s never hard to pick out staggering losses in options when markets tumble, and plenty of examples exist of well-timed puts, today’s losses were particularly harrowing for the longs. A call with a $125 strike price on Apple Inc. shares, expiring tomorrow, plunged 89% as shares sank 8% to $121. A bullish wager for Tesla Inc. to reach $500 by Friday’s expiry lost 90% as the stock dropped 9% to $407. And a call on Zoom Video Communications Inc. with a strike price of $420 became essentially worthless as shares hit $381.

The hazards of a badly timed options trade are severe. How well understood they are by newbie traders is a point of debate on Wall Street, where veterans have looked on with skepticism as tiny traders spent August brandishing evidence of their winnings on Twitter. Whether small-time day traders foresaw the risks or not, they understand them better after Thursday.

Day traders burned by the abrupt drop quickly turned to the Internet. On the 1.5 million-member Reddit forum called r/wallstreetbets, user pavanthedataguy bemoaned the ‘worst timing’ in his purchase of Amazon.com Inc. and DocuSign Inc. calls, expiring next Friday. Another user, commenting under the name Commercial-Glass-625, posted a screenshot of his mostly-red options account and asked, ‘Am I doing this right?’

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