October 13, 2025
3 min read
With rising market volatility and more physicians exploring side investments, options trading has become an increasingly common topic in financial discussions.
Although options can offer flexibility, leverage and income opportunities, they also carry significant risks. A clear understanding of the basics is essential before getting started.
Options are financial contracts that give the buyer the right — but not the obligation — to buy or sell an underlying asset (usually a stock) at a predetermined price within a set time frame. Unlike stocks, options do not represent ownership; they are derivatives, meaning their value is derived from another asset.
Two primary types of options exist:
Options can be purchased (long positions) or sold (short positions), and they can be combined into sophisticated strategies such as spreads, straddles or covered calls. Each strategy carries unique risk and reward profiles.
For physicians seeking to diversify investments, options can be used strategically to:
For example, a physician who owns a broad stock exchange traded fund, like SPY or QQQ, might purchase put options to protect against a market downturn. This can be a cost-effective way to limit downside risk without selling underlying holdings.
Despite their appeal, options are not passive investments. Their value depends on multiple variables — including stock price, time to expiration, interest rates and, especially, volatility. Even modest stock movements can produce rapid gains or steep losses in option prices.
For busy medical professionals, the main drawbacks include:
A particularly risky strategy is selling uncovered (naked) options — for example, selling a call without owning the underlying stock. If the stock price rises sharply, losses can be unlimited, far exceeding initial capital.
Chirag P. Shah
Physicians typically lack the time to monitor fast-moving markets throughout the day. Options trading also requires margin agreements, detailed tax reporting and meticulous record-keeping — often done outside clinical hours. These practical realities make high-frequency or speculative trading particularly challenging.
For most physicians, conservative options strategies — such as covered calls or protective puts — are more appropriate than speculative investments. Using complex or leveraged strategies without adequate preparation can expose portfolios to unnecessary risk and volatility.
Jayanth Sridhar
Options trading can be a powerful tool in skilled hands, offering flexibility, hedging opportunities and income potential. However, for most physicians, the downsides — complexity, volatility, time demands and the risk for large losses — often outweigh the benefits.
Before engaging, physicians should thoroughly understand option mechanics, consider practicing with paper trades or online trading simulators and consult experienced financial advisors. As in medicine, knowledge, preparation and experience are essential to avoid complications.
Chirag P. Shah, MD, MPH, is a soccer and Nordic ski coach who also practices medicine and teaches in Boston. He can be reached at cshah@post.harvard.edu.
Jayanth Sridhar, MD, is an award-winning podcaster, physician and educator who is chief of ophthalmology at Olive View Medical Center in Los Angeles. He can be reached at jsridhar119@gmail.com.
Editor’s note: This article is for educational purposes only. Please consult a licensed financial advisor before making any investment decisions.
Source:
Expert Submission
Disclosures:
Shah and Sridhar report receiving and donating royalties as co-authors of Financial Freedom Rx: The Physician’s Guide to Achieving Financial Independence.
