TL;DR

A Reddit user bet big on Reddit’s stock falling, nearly winning but then quickly losing big money. The story showcases how risky options are.

Story

A Reddit user, known as u/ISKslav, gambled $389,000 on put options* of the social media platform Reddit (RDDT). Put options give the buyer the right, but not the obligation, to sell a stock at a specific price within a certain timeframe. He bet that Reddit’s stock price would fall. Initially, the bet looked promising, with potential profits soaring. However, the market turned against him, and his potential winnings evaporated, turning into a substantial loss. The allure of quick riches blinded him to the inherent risks of options trading. His plight serves as a cautionary tale of the dangers of speculation and the importance of understanding complex financial instruments before risking significant capital. This echoes historical market manias, from the Dutch tulip bubble to the 2008 housing crisis**, where unchecked speculation led to devastating consequences. u/ISKslav’s story reminds us that markets are unpredictable and fortunes can reverse in an instant. ‣ Put Option: A contract giving the owner the right to sell an asset at a specified price on or before a particular date. ‣ 2008 Housing Crisis: A severe worldwide economic downturn triggered by a collapse in the U.S. housing market.

Advice

Options trading is extremely risky. If you don’t fully understand the mechanics, stay away. Even if you do understand, the odds are stacked against you.

Source

https://www.reddit.com/r/wallstreetbets/comments/1iokf8f/389k_rddt_puts_its_not_over/