Eye Surgeon Lost 15k USD in Options Trading

Dr Francis Oen, an eye surgeon, is featured in the Invest column in today's Sunday Times.

Having invested money (and lost some) in stocks, property, exchange traded funds (ETFs) and options, I believe it's fair for me to call him a veteran in investments.

So maybe we can learn a thing or two from this veteran.

Dr Oen's best investments are in property. His first property more than doubled in value, while his 2nd and current one is up by 60%. Not surprising, considering that many shrewd investors think property is the way to go in land-scarce Singapore.

Property - good.

As for his worst investments, he has two. One is his Clob portfolio, and the other is - drum roll - options trading.

I'm sure he's aware of those options trading seminars that claim "X% profit in just 1 trade" or the like, and he would have attended them if he thought they are worthwhile. See my post on get rich seminars.

He lost US$15,000 trading options, and has given up on it (he switched to ETFs).

Options trading - bad.

http://www.salary.sg/2008/eye-surgeo...tions-trading/

You can't really decide that it has been a bad investment only after you have done it, and very badly at it. Vice versa for the good investments.
That's why it is important to do asset allocation. One rule of thumb is to limit any exposure to a narrowly-focused asset/sector to no more than 10%.

The more highly leveraged a product is, the greater the risk, and options are at the very highest end of the leverage spectrum.

Property in SG, might be a shrewd and straight-forward investment but it requires high initial capital that not everyone may have access to and there are many barriers to entry, while options are highly liquid and easily tradeable.

They were invented to hedge large long exposures, then evolved to take speculative positions, and now to the frenzied approach of "easy money" we have today. Quick returns are great, but not so easy to sustain in this volatile environment. The Black-Scholes option pricing model is not able to price in forward looking volatility and investor irrationality!

If you are a serial gambler and cannot help yourself taking a punt, do cash equities instead... you risk relatively less.

he must be an idoit that do not do proper research, read news and know how to read indicators properly, and psychologically not prepared to trade. In trading, psychology is the key. 80% - 90% in trading depends on psychology.

I say he got greedy and didn't do proper money management.

[Hermit]

Originally Posted by 5m10y--

I say he got greedy and didn't do proper money management.

15k loss is peanuts for him.

He has a day job as a doctor, no way he is going to be a good trader. But doctors generally make good money from their properties because they buy and hold for a long time.

Originally Posted by Hermit

15k loss is peanuts for him.

He has a day job as a doctor, no way he is going to be a good trader. But doctors generally make good money from their properties because they buy and hold for a long time.

Ya man. An eye surgeon prob earns $50k to $100k per month, and the best ones will earn $5 to $10 m per year. So even assuming he's in the first category, $15k is only 15 to 30% of his monthly pay or $300 to $750 for the median Singaporean earning about $2500 per month.

Not significant at all !

[Hermit]

Originally Posted by Unregistered

Ya man. An eye surgeon prob earns $50k to $100k per month, and the best ones will earn $5 to $10 m per year. So even assuming he's in the first category, $15k is only 15 to 30% of his monthly pay or $300 to $750 for the median Singaporean earning about $2500 per month.

Not significant at all !

You got your numbers correct, mate.

Eye surgeons are in a very lucrative trade. A lot of procedures and a lot of surgeries. Eye surgeries are also priced higher than some operations on other parts of the body. This all translate into a very skewed income advantage for those who specialise in eye.

Many surgeons can buy a car every month if they want. Many people just do not even understand how they can be so rich. $15k is really loose change.

Hi it's great to see different discussion on this thread but personally i would like to seek redress for options trading as i believe it can be a tool to generate passive income for us given that we know how to use it coupled with stock analysis knowledge. I always believe to survive in this world, each individual only needs a few tricks to generate enough passive income so that they can become self sufficient in the long run (Or maybe till retirement..) =) Just my thoughts...

Originally Posted by ahsun

Hi it's great to see different discussion on this thread but personally i would like to seek redress for options trading as i believe it can be a tool to generate passive income for us given that we know how to use it coupled with stock analysis knowledge. I always believe to survive in this world, each individual only needs a few tricks to generate enough passive income so that they can become self sufficient in the long run (Or maybe till retirement..) =) Just my thoughts...

How much passive income have you generated?

It is not passive if you have to spend time working at it. Do you say traders in banks are making passive income for the bank?