Let me be honest with you: 2025 started with one of the most brutal drawdowns I've experienced in my entire options trading career. If you've been following my trades on this website, you already know the pain. Both my SPY Put Credit Spread strategy and my Zero DTE SPX Iron Butterfly strategy took devastating losses in the first quarter—losses that completely wiped out the previous year's gains and then some.
What Caused the 2025 Drawdown
The culprit was volatility—specifically, the kind of unpredictable, headline-driven volatility that Wall Street absolutely hates. The Trump administration's tariff announcements were rolled out in the most chaotic way imaginable. One day we'd hear about new tariffs, the next day they'd be delayed, then they'd be back on but with different countries. The uncertainty was suffocating.
If there's one thing the stock market cannot tolerate, it's uncertainty. Investors can handle bad news. They can price in recessions, interest rate hikes, and geopolitical tensions. What they can't handle is not knowing what's coming next. And that's exactly what we got in early 2025—a fire hose of mixed signals that sent volatility through the roof.
My strategies are designed to profit from selling premium in relatively predictable markets. When volatility spikes beyond historical norms, the risk/reward equation breaks down. And that's exactly what happened.
The Emotional Toll of Watching Gains Evaporate
I won't sugarcoat this: watching an entire year's worth of carefully accumulated profits disappear in a matter of weeks is gut-wrenching. There were moments when I seriously questioned whether this whole options trading thing was worth it.
When you're deep in a drawdown, the doubts creep in:
- Maybe options trading is just too risky
- Maybe I should go back to traditional buy-and-hold investing
- Maybe all those gains from previous years were just luck
- Maybe the strategies don't actually work
These thoughts are natural. They're also dangerous if you act on them. The worst thing you can do during a drawdown is abandon a strategy that has a proven track record just because it hit a rough patch.
How I Keep Perspective During Drawdowns
Here's the mental exercise that keeps me grounded when everything feels like it's falling apart: I zoom out to a five-year window.
I look at my total gains over the last five years. Then I add in these new drawdowns. Then I compare that number to how the S&P 500 performed over the same period. And you know what? Even after these brutal 2025 losses, I'm still way ahead of where I'd be if I had just bought an S&P 500 index fund and sat on my hands.
That's the reassurance I need. I'm still playing with house money. As long as I continue to outperform passive index investing over any rolling five-year period, all this effort, all this stress, all this active engagement with the markets—it's worth it.
This perspective doesn't make the losses hurt less. But it prevents me from making the cardinal sin of trading: abandoning a winning strategy during a temporary losing streak.
Active Trading Demands Outsized Returns
Let me be clear about something: I don't teach passive investing here at Options Cafe. What I teach—what I practice with my own money—is active options trading. This isn't set-it-and-forget-it. This requires ongoing engagement, monitoring, and decision-making.
For that effort to be worthwhile, we need outsized returns. If I'm only matching the S&P 500, I should just buy SPY and go fishing. The whole point of active trading is to beat passive alternatives by enough of a margin to justify the time, energy, and emotional bandwidth it requires.
Drawdowns are the price we pay for that opportunity. No strategy generates consistent returns without periods of loss. If such a strategy existed, everyone would use it, and it would immediately stop working.
Drawdowns Are Opportunities in Disguise
Every significant drawdown I've experienced has taught me something valuable. This one was no exception.
As I discussed in my previous blog post, the drawdowns in early 2025 forced me to reevaluate my strategy mix. The Zero DTE SPX Iron Butterfly approach that had worked beautifully in calmer markets was getting destroyed by the unpredictable volatility. Rather than stubbornly continuing to trade a strategy that didn't fit current conditions, I pivoted.
I went all-in on the Wheel Strategy—and it ended up being one of the best decisions I've made. The Wheel thrives in volatile, headline-driven markets because it doesn't require the market to behave in any particular way. It just needs stocks to move, which they certainly did in 2025.
When life gives you lemons, make lemonade. When the market gives you drawdowns, take it as a signal to reassess and adapt.
The Put Credit Spread Comeback Story
Here's the part of the story that makes the pain worthwhile: my SPY Put Credit Spread strategy finished 2025 with a 42.33% return.
That's not a typo. A strategy that was deeply underwater for most of the year came roaring back in Q4 to post one of its best annual performances ever. The entire second half of the year was spent climbing out of the hole created by Q1 losses.
Imagine if I had given up. Imagine if, after watching those early losses pile up, I had decided the strategy was broken and stopped trading it. I would have locked in the losses and missed the entire recovery.
This is why discipline matters more than anything else in trading. You have to keep executing a strategy you know works, even when—especially when—it's producing losses. Drawdowns are temporary. Quitting is permanent.
A Word of Caution for New Traders
There's an important lesson here for anyone just starting their options trading journey: timing matters more than you might think.
If you started trading on January 1, 2025, following these strategies, it would have been an incredibly frustrating year. You didn't have years of accumulated profits to cushion the blow. You were starting fresh, and within weeks, you were deep in the red.
Some unlucky people will start their trading journey at the beginning of a drawdown. It happens. You can't predict when market conditions will turn hostile to your chosen strategy.
This is exactly why I encourage new traders to start with very small amounts of money. Build your skills and confidence with position sizes that won't devastate you if things go wrong early. Expect that you might blow up a small account or two before you find your rhythm.
Think of those early losses as tuition. Everyone pays it one way or another. Better to pay it with $5,000 than with your entire retirement savings.
The Real Message: Drawdowns Are Part of the Game
If you take one thing away from this post, let it be this: drawdowns are expected. They're not a sign that options trading doesn't work. They're not a sign that you're doing something wrong. They're a normal, unavoidable part of active trading.
Every strategy will have periods where it underperforms. Every trader will experience stretches where nothing seems to work. The difference between traders who succeed long-term and those who flame out is how they handle these periods.
Do you panic and abandon ship? Or do you stay disciplined, keep your position sizes appropriate, and trust in a process that has proven itself over time?
Looking Forward to 2026
I'm entering 2026 with the same strategies I've always traded, adjusted for what I learned in 2025:
- SPY Put Credit Spreads continue to be my foundational income strategy—the 42.33% return proved the approach still works
- The Wheel Strategy has earned a permanent place in my portfolio after saving what could have been a disastrous year
- Zero DTE SPX Iron Butterflies remain on reduced activity until market conditions favor them again
I've also started sharing real-time alerts for my Wheel Strategy trades, giving course members full visibility into how I'm adapting to current market conditions.
If you're experiencing drawdowns right now, or if you're hesitant to start trading because you're afraid of losses, I hope this post helps put things in perspective. Losses happen. Drawdowns happen. What matters is staying in the game long enough for the winning streaks to make up for the losing ones.
See you in the markets.
Related Topics: Options Trading Drawdowns, Options Trading Losses, Trading Psychology, Put Credit Spreads, Iron Butterfly Strategy, Wheel Strategy, Risk Management Options, Options Income Strategy, Managing Trading Losses, Long Term Trading Success
