| Stock options allow you to make huge returns in the | | | | lose all of your money trading smaller positions is the |
| market. When they are winning it is easy to get | | | | way to go. If you had an account and only put |
| carried away with them and risk too much, but if you | | | | $500-$200 into any 1 trade well those trades would |
| are going to survive as a trader you must make risk | | | | not exactly bankrupt you if you where wrong a |
| management your number 1 concern. | | | | fewtimes. |
| So how do you manage your risk with options, | | | | 2. Putting Stop Orders on Options |
| especially considering when you buy options you can | | | | Another thing you can do is to put stop orders on |
| already lose 100% of your investment? Here two | | | | your options. Instead of buying an option and risking |
| different things you can do to help manage your risk | | | | 100% of that investment, you could always buy an |
| when dealing with options. | | | | option and place a stop if you lose 50% or so of the |
| 1. Use small positions | | | | option. |
| The first thing you can do is to use smaller positions. | | | | This way you would at least walk away with some |
| If you have $10,000 and put $10,000 into an option | | | | money if you are wrong, even if it is less then what |
| trade that is foolish. Sure if you are right on that 1 | | | | you started with. |
| trade you could double or triple your account, but if | | | | Remember buy and hold does not work with options. |
| you are wrong you risk the whole account. | | | | Options will eventually expire after a relatively short |
| Over positioning yourself with options is a great way | | | | period of time. If you want to make money with |
| to go broke in the long term. Unless you want to | | | | them it has to be in the short term. |