Options Risk Management
Position sizing, liquidity, event planning, maximum loss, and portfolio-level exposure.
Risk begins before entry
A trade plan should identify maximum loss, intended position size, liquidity requirements, event exposure, exit conditions, assignment considerations, and the role of the trade within the larger portfolio.
Core checklist
- Can the maximum loss be calculated?
- Could actual losses exceed the simplified maximum because of assignment, exercise, or execution issues?
- Is the bid-ask spread reasonable relative to the premium?
- Is there an earnings announcement, dividend, or expiration event?
- What invalidates the thesis?
- What happens if no exit order fills?
- How does the position interact with other portfolio exposures?
Use the position-size calculator as an educational starting point, not a personalized recommendation.