Reality vs. theory

Taking options transactions as an example

In school, I have learn many theories regarding options. Option design, option combination, option evaluation... With much knowledge acquired from school, I thought making an option transaction would be straightforward and with little risk compared to general population. And it turned out, no, it was not such a case.

Two months ago, I decided to exercise my option knowledge. I had been thinking to do so for some times. It was exciting to see the transaction went through. I thought I planed well. But, my little prediction did not click the market trend. The options have behaved like balloons. One option will be expiring tomorrow but the value was worth nothing. If I were to exercise this going-to-expire option, I would lose approximately $3,000 at the time I exercise. I did not realize this until this morning. I was surprised to realize I forgot many fundamental assumptions. Reality has given me some lessons.