How Much Are You Risking On Each of Your Bets?

How much of your capital, in relative terms, do you risk on options at any given time?

  • <2%

  • 2-4%

  • 4-6%

  • 6-8%

  • 8-10%

  • >10%

Results are only viewable after voting.
I take 5-10% position sizes, I take some nasty drawdowns sometimes but I have been consistently profitable the last 4 years and I have traded through some tough times. I believe part of being a good trader is learning to trade with size once you become consistently profitable
 
zero issue with 100% capital on a DITM naked option for ~2% return per trade that would yield average 12% across 12 mths doing a combination of several trades

TQQQ last at $145, a 30 day trade might be the Nov 20 expiry $85 strike naked put trade at $1.70

minimum 100 contacts trade 100% fully costed/covered

play time decay
 
For futures day trades, enough increments lie below 2% to separate out .5, 1 and 2%. There can be a lot going on right there alone.
Stop Gap used to size a trader's position generates consistency and keeps a trader in the game when serial losses make a visit to a screen near you. da bastads.

Stevo goes into the majic of 1% here...cued and ready to roll
 
thefairarbiter said:
I'm getting into option strategies and trying to develop a risk model for the capital i have (about 4k). My platform is IB TWS.

The risk/reward of options strategies can be complicated when you start factoring in probabilities and integrating risk over a series of trades as opposed to just a single trade.

How much, in relative terms to your account, do you typically risk on option contracts at a given time? (In other words, how much of your account is at risk at once, integrated over all your options positions)

What is the best way of calculating the risk of, say, a short butterfly call, considering maximum loss is unlikely, but probability of any loss is significantly likely? Is their a more effective way of calculating this risk than just simply integrating over the loss zone, assuming a normal distribution of underlying price at the expiration date?

How do you maintain a risk measurement of the trade after you've entered it, and the ongoing movements of the underlying change the probabilities of PnL?
More...
5-10% of what, your working capital? or your risk capital.
 
Ok, got it, lol. For a newby who rolls across this thread sometime they could look at Risk Capital Per Trade as the value between the Stop Value and the Trade Entry Value or "the Stop Gap Value". Entry long at 100 with a Stop at 95? Then Stop Gap Value = 5, or the Value at Risk.

If a trader wanted to Risk 1.5% of Account Value to each trade then they could calculate that to dial it in and know that they are consistently applying Value according to Plan. The idea being to Grow Account Value regardless of starting size.
From options traders, it would be interesting to learn how that gets done. I didn't notice this was an options thread until too late, my bad.
You options guys can have that defined risk thing going for you which is a major benefit vs skipped over stops etc that occured in that youtube vid up there 5% of his trades, called uncontrollable loss = more than stop was triggered at, eg stock gapped past stop before executed. Good Morning.

From an ET Sponsor's Website comes this...
"Is My Position Size Calculated Properly?"
https://elitetrader.com/et/threads/...solid-trading-plan.340340/page-4#post-5054656
 
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Bekim said:
I take 5-10% position sizes, I take some nasty drawdowns sometimes but I have been consistently profitable the last 4 years and I have traded through some tough times. I believe part of being a good trader is learning to trade with size once you become consistently profitable
More...
%%
That's sounding real close to IBD math;
risk 7or 8% for $24 or 24% per position. That can work well for ETFs also;
different for shorts/invrese ETFs
Most+ many mutual funds risk 95%-99%= could work well if one get paid on AUM/LOL.
Maybe why only 20% beat SPY benchmark, over 10 years.
 
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