The Hard Truth: Only 10% of Options Traders Actually Make Money

Let’s face it – options trading looks tempting The potential for quick profits, the leverage, the excitement.. but how many people actually succeed at options trading? The answer might shock you.

According to comprehensive data from the CBOE, only 10% of options traders make money consistently. The other 90%? They end up losing their investments.

I’ve been studying the options market for years and these statistics confirm what many experienced traders already know options trading is no walk in the park. Let’s dive into the surprising numbers behind options trading success rates and what separates the winners from the losers.

Options Trading Success Rate: The Brutal Reality

When I look at the data from reliable sources the picture becomes clear

• 10% of traders make money consistently
• 10% break even over time
• 80% lose money when trading options

If you’re thinking about getting into options trading, you need to understand what you’re up against. This isn’t meant to discourage you, but rather to prepare you for the challenging road ahead.

What Happens to Most Option Contracts?

Here’s another interesting set of statistics from the Chicago Board Options Exchange (CBOE):

• 55-60% of option contracts are closed out before expiration
• 10% of option contracts are exercised
• 30-35% of option contracts expire worthless

This means about a third of all option contracts end up as complete losses for the buyers. That’s a sobering thought!

The Market Size: You’re Swimming With Sharks

To understand your chances better, let’s look at who you’re competing against in this massive market:

• Options trading volume topped 10 billion contracts in 2022
• 2021 saw a record 9.87 billion contracts, up 32.2% from the previous year
• 2022’s volume was double that of 2019 (which was also a record)
• For Q1 2023, 1.8 billion contracts were traded

The most actively traded options are:

Who’s Making All The Money?

If you’re wondering where all that money is going, look to the professional traders and market makers. The richest option traders in the world include:

• Carl Icahn: $17.6 billion
• George Soros: $6.7 billion

But what about the average successful options trader? In America, options traders make an average salary of $110,139 per year or about $53 per hour. The top 10% make over $185,000 per year, while the bottom 10% earn under $65,000 annually.

The Demographics: Who’s Trading Options?

Understanding who’s in the game can give you insights into the competition:

Gender Distribution

• 90.8% of options traders are men
• Only 9.2% are women
• Women earn about 90¢ for every $1 earned by men in options trading

Age Distribution

• 58% of options traders are 40+ years old
• 28% are between 30-40 years old
• 14% are between 20-30 years old

Education Levels

• 82% have a bachelor’s degree
• 12% have a master’s degree
• 3% have an associate degree
• 1% have a doctorate
• 2% have other degrees

This paints a picture of options trading as a field dominated by well-educated, middle-aged men. If you don’t fit that profile, you might face additional challenges, but that doesn’t mean you can’t succeed!

Why Do So Many Options Traders Fail?

Through my experience and observation, I’ve identified several key reasons why 90% of options traders end up losing money:

1. Lack of education: Many jump in without understanding the complex mechanics of options
2. Poor risk management: Betting too much on single trades
3. Emotional trading: Making decisions based on fear or greed
4. No solid strategy: Trading randomly without a tested approach
5. Unrealistic expectations: Expecting to get rich quickly
6. Insufficient capital: Starting with too little money to weather losses

How to Join the Successful 10%

If you’re determined to beat the odds and join the 10% who make money consistently with options trading, here’s what you need to focus on:

1. Education is Non-Negotiable

Successful options traders invest heavily in their education. They:

• Study the Greeks (Delta, Gamma, Theta, Vega)
• Understand different strategies for different market conditions
• Learn to read charts and technical indicators
• Keep up with market news and economic factors

2. Develop a Trading Plan

You need a systematic approach to options trading:

• Define your entry and exit criteria
• Set profit targets and stop losses
• Determine position sizing based on risk tolerance
• Have strategies for bullish, bearish, and sideways markets

3. Practice Strict Risk Management

This is where most traders fail:

• Never risk more than 1-2% of your account on a single trade
• Diversify your positions
• Don’t chase losses
• Be prepared to take small losses to avoid catastrophic ones

4. Start Small and Scale Up

Even if you have a large account:

• Begin with simpler strategies like covered calls or cash-secured puts
• Trade small positions until your strategy proves profitable
• Gradually increase position size as you gain confidence and experience
• Keep detailed records of all trades to identify what works

5. Control Your Emotions

The psychological aspect of trading is critical:

• Follow your plan even when emotions run high
• Accept that losses are part of the game
• Don’t overtrade out of boredom or FOMO
• Take breaks when needed to maintain perspective

The Timeline to Success

Many people ask me how long it takes to become a successful options trader. The truth is, it varies greatly:

• 1-2 years: Learning the basics and developing fundamental skills
• 3-5 years: Becoming consistently profitable for many traders
• 5+ years: Reaching mastery and potentially trading for a living

Remember that these are just averages. Some people pick it up faster, while others take longer. The key is persistence and continuous learning.

Is Options Trading Worth It?

With a 90% failure rate, you might wonder if options trading is even worth pursuing. My answer is: it depends on your goals, temperament, and commitment level.

If you’re looking for a get-rich-quick scheme, then no, options trading isn’t for you. But if you’re willing to:

• Invest time in learning
• Accept losses as part of the journey
• Approach trading as a business, not a hobby
• Maintain realistic expectations

Then yes, options trading can be very rewarding both financially and intellectually.

Final Thoughts

The statistic that only 10% of options traders succeed might seem discouraging, but I prefer to see it as a reality check. Options trading isn’t easy money – it’s a skill that requires dedication, discipline, and continuous learning.

If you’re serious about joining that successful 10%, start by being honest with yourself about your current knowledge level and commitment. Then create a realistic plan to develop the skills and mindset needed to succeed in this challenging but potentially rewarding field.

Remember, even the most successful options traders had to start somewhere. The question is: are you willing to put in the work required to beat the odds?

The “84% rule” is a trading strategy that suggests a trade setup has an 84% chance of success if it occurs again after an initial stop-out, provided the trade criteria (including stop-loss and targets) are identical. This rule is often applied when a key level is reclaimed, such as a break and retest of a support or resistance level.