Position sizing: how much to risk
1In one sentence
Position sizing is deciding how much to put into one trade, so that being wrong doesn't wreck your account.
Many traders risk a small, fixed share of the account per trade, often 1% to 2%. When you buy options, what you pay is the risk.
2Try it: size a trade
Pick your account size, how much of it you'll risk on one trade, and what one contract costs.
33 words to know
Risk per trade% of account
The most you're willing to lose on one idea, as a share of the account.
Contract costprice × 100
What one option contract costs, and the most a bought option can lose.
Drawdownfall from peak
How far the account drops during a losing streak.
4Watch out
- Losing streaks happen. Even good strategies lose several times in a row. Small risk per trade lets you survive them.
- Bigger losses need bigger wins. Lose 50% and you need +100% to get back to even.
- Don't size up after losses. Trying to win it back quickly is how small drawdowns become big ones.
5Quick check · 3 questions · optional
Common questions
How much should I risk per options trade?
Many traders risk 1% to 2% of their account per trade, so a string of losses doesn't do lasting damage. For bought options, the premium paid is the risk.
How do I calculate position size for options?
Divide the dollar amount you're willing to risk by the cost of one contract (price × 100). Round down; if it's below 1, the trade is too big for your account.
Why does position sizing matter?
Because losses compound. Risking a small, fixed share per trade keeps drawdowns survivable and leaves room for the strategy to work.
Education only. Examples use illustrative numbers. Not financial advice; you make your own decisions.