Description

Welcome to the Options Trading Podcast. In this episode, we tackle the absolute bedrock of long-term investing success.

How do I manage risk when trading options?

Options offer incredible leverage and flexibility, but without a solid safety net, that same leverage can be account-destructive. We break down the "survival first" mindset, moving past the hype to focus on the 10 non-negotiable principles of risk control. From the 1% position sizing rule to the "silent killers" like time decay and volatility, this episode is designed to help you stay in the game long enough to thrive. We also discuss essential tools like Thinkorswim, Tastyworks, and the importance of a simple trading journal.

What is one risk management rule you’ve implemented that completely changed your trading results? Let us know, and don't forget to subscribe for more simplified options guidance!

Key Takeaways

• The 1-3% Rule: Never risk more than 1% to 3% of your total account value on a single trade to ensure a losing streak doesn't wipe you out.
• Know Your Max Loss: Before entering any trade, you must identify the absolute worst-case scenario; if the number makes you uncomfortable, reduce your size or walk away.
• Prioritize Defined Risk: For beginners, strategies like credit spreads and iron condors are superior because the maximum risk is capped and known upfront.
• The Psychology of "Boring": Professional traders aim to be "boring and profitable" by trading with mental clarity rather than emotional desperation.

"Every trade starts with risk. Profit is only a possibility. Risk is basically guaranteed."

Timestamped Summary

• [01:53] Principle #1: Always know your maximum possible loss before hitting "confirm."
• [03:40] Principle #2: The 1% to 3% position sizing rule for account longevity.
• [06:30] The "Silent Killers": Managing time decay (Theta) and volatility (Vega).
• [08:50] Setting exit rules: When to take profits (50-75%) and when to cut losses.
• [12:15] Portfolio Greeks: Understanding your total market exposure and directional bias.

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