'What if I took two loans to do options trading?': Internet is baffled at viral Reddit post

Options traders on X (formerly Twitter) have lately been racking their brains over an Instagram post about taking loans to fund options trading. 

Instagram handle @notfinancialadvice_, an account dedicated to memes about global stock markets, posted about an anonymous man who posted on Reddit about his investment strategy: "What if I take out two loans for the same amount and then I purchase both calls and puts for a stock. Worst case scenario, I lost 100% of one of the loans but that would mean that the other loan is in profit, which I can use to pay off the other loan while keeping extra profits! The logic is, I can only lose 100% but I can win more than 100%. So, what are the downsides?".

Stock market traders said that while the plan looks foolproof on paper, the man is missing the most essential part of options trading -- Theta. 

Theta refers to the rate of decline in the value of an option due to the passage of time.

Traders on X said that the man is being foolish for thinking he can earn over 100% on one side of the trade to offset the other side of the trade and still end up in profit. 

"House always wins," said some X users referring to options trading being a zero sum game for those who are not aware of the risks involved in it.

One X user said this man is "exhibit A, B, C, & D as to why 99.99% of people that trade options should never, ever, ever trade options".

"My suspicion is that you would have to be really good at options trading for this to work out," said a concerned X user about the man's trading strategy.

"Don’t tell him both loans will need to be paid off," joked an X user. 

Retail investor participation in the equity derivatives market jumped 500% in the three years through March, according to data from the Securities and Exchange Board of India (SEBI). Nine in 10 individual traders, dominated by people in their 30s, lost money in the previous fiscal year, with average losses averaging Rs 1.1 lakh, a SEBI study found in January.

SEBI has previously asked brokers to discloses risks associated while trading in derivatives prominently on their websites but is now considering stricter measures, said a Reuters report, which the market regulator denied.