{"id":77861,"date":"2025-06-18T15:33:38","date_gmt":"2025-06-18T19:33:38","guid":{"rendered":"https:\/\/blog.t3live.com\/?p=77861"},"modified":"2025-06-18T15:35:36","modified_gmt":"2025-06-18T19:35:36","slug":"scott-redler-how-i-size-options-positions","status":"publish","type":"post","link":"https:\/\/blog.t3live.com\/2025\/06\/18\/scott-redler-how-i-size-options-positions\/","title":{"rendered":"How I Size Options Positions Based on the #1 Question I Always Ask Myself"},"content":{"rendered":"

Editor's Note: this article was originally sent to Power Plays Options Subscribers<\/strong><\/a><\/span>. We are publishing it here as a gift for the T3 Live community.<\/em><\/p>\n

One of the most common questions options traders have is \u201chow big should I size my positions?\u201d<\/p>\n

And that\u2019s a good thing because position sizing is critical to your options trading results.<\/p>\n

Get it wrong, and be ready to see your account head to $0. Get it right, and you\u2019ll be on the road to long-term success.<\/span><\/p>\n

So I wanted to give Power Plays Options<\/strong><\/a><\/span> subscribers a primer on how I think about sizing.<\/p>\n

The #1 Question I Ask Myself<\/b><\/p>\n

I use options because they offer high upside potential with fixed downside risk.<\/p>\n

Note: some options strategies like shorting naked calls carry theoretically unlimited downside risk, but\u00a0 Power Plays Options does not use those strategies.\u00a0\u00a0<\/i><\/p>\n

When I put an options trade on, I ask myself \u201cwhat am I willing to lose?\u201d<\/p>\n

Yes, I want to make money.<\/p>\n

But focusing on what I can lose stops me from getting carried away when I have a strong opinion on a stock or ETF.<\/p>\n

For example, in early June, I was very bullish on\u00a0IWM<\/b>, and we had a nice trade on IWM calls.<\/p>\n

But even though I liked IWM, I wasn\u2019t willing to risk $100,000 on an options position.<\/span><\/p>\n

Because sometimes, no matter how hard we work and prepare, things don\u2019t go our way.<\/p>\n

How I Size Options Positions<\/b><\/p>\n

Generally speaking, I\u2019m willing to risk 2-3% of my options account on an individual idea.<\/p>\n

So on a $100,000 account, I\u2019d put $2,000 to $3,000 into each trade.<\/span><\/p>\n

\u00a0<\/i>This way, if I take a few losses in a row, my overall account won\u2019t be depleted.<\/p>\n

If I was risking 10% of my account per trade and had 3-4 straight losses, that would deplete 2 things:<\/p>\n

    \n
  1. Account Capital: When you lose 30%, you have to gain 43% to get to breakeven. And if you lose 50%, you have to double your account to get back to where you were.<\/li>\n
  2. Psychological Capital: Major drawdowns hurt your confidence and ability to make good decisions. You may be tempted to revenge trade, which would probably cost you even more money.<\/li>\n<\/ol>\n

    At the same time, I\u2019m looking to gain over 100%+ on each options trade.<\/p>\n

    So as long as I maintain a decent batting average, my P&L has the potential to move up nicely.<\/p>\n

    Position Sizing for New Traders<\/b><\/p>\n

    If you\u2019re new to Power Plays Options, I want you to start small – even if you\u2019re an experienced pro with a $1 million+ account.<\/span><\/p>\n

    I said above that I\u2019m willing to risk 2-3% of my options account on an individual idea.<\/p>\n

    But I may go even smaller if I\u2019m trying out a new strategy, or working with a stock I don\u2019t know particularly well.<\/p>\n

    It\u2019s okay to buy just one option contract while you get your feet wet.<\/p>\n

    Buying multiple contracts gives you more flexibility for taking partial profits.<\/p>\n

    But if you take a long-term view of your trading (which I hope you do), it\u2019s better to start small and gradually take more risk as you feel comfortable.<\/p>\n

    Starting small also helps you figure out your psychological limits.<\/p>\n

    If risking 3% on a trade keeps you up at night, then you know it\u2019s too much for you.<\/p>\n

    And if you risk so little that you don\u2019t even care about a trade, then you\u2019re going too small.<\/p>\n

    It might take you a little time to figure out the right balance for you.<\/p>\n

    When Winning Is a Bad Thing<\/b><\/p>\n

    Sometimes, the worst thing that can happen to a trader is making too much money too fast.<\/p>\n

    Yes, it sounds counterintuitive.<\/p>\n

    But imagine you have a $50,000 account. You put it all into one trade and double your money.<\/span><\/p>\n

    You\u2019ll be happy in the moment.<\/p>\n

    But you\u2019ll also have a warped sense of how risk and reward work – and you\u2019d probably blow out your account from taking too much risk on your next few trades.<\/p>\n

    It\u2019s okay to shoot for big rewards.<\/p>\n

    But remember that you can\u2019t get those rewards without taking a certain level of risk.<\/p>\n

    So to wrap this up:<\/p>\n

      \n
    1. Always Know What You\u2019re Willing to Lose<\/li>\n
    2. Start With Small Positions, Even If They Feel Too Small<\/li>\n
    3. Build Your Risk Tolerance Slowly<\/li>\n<\/ol>\n

      And I'd recommend you follow these steps in any trading program you join, whether it's Power Plays Options<\/strong><\/a><\/span> or anything else.<\/p>\n","protected":false},"excerpt":{"rendered":"

      Editor’s Note: this article was originally sent to Power Plays Options Subscribers. We are publishing it here as a gift for the T3 Live community. One of the most common questions options traders have is \u201chow big should I size my positions?\u201d And that\u2019s a good thing because position sizing is critical to your options trading results. Get it wrong, and be ready to see your account head to $0. Get it right, and you\u2019ll be on the road to long-term success. So I wanted to give Power Plays Options subscribers a primer on how I think about sizing. The #1 Question I Ask Myself I use options because they offer high upside potential with fixed downside risk. Note: some options strategies like shorting naked calls carry theoretically unlimited downside risk, but\u00a0 Power Plays Options does not use those strategies.\u00a0\u00a0 When I put an options trade on, I ask myself \u201cwhat am I willing to lose?\u201d Yes, I want to make money. But focusing on what I can lose stops me from getting carried away when I have a strong opinion on a stock or ETF. For example, in early June, I was very bullish on\u00a0IWM, and we had a nice trade on IWM calls. But even though I liked IWM, I wasn\u2019t willing to risk $100,000 on an options position. Because sometimes, no matter how hard we work and prepare, things don\u2019t go our way. How I Size Options Positions Generally speaking, I\u2019m willing to risk 2-3% of my options account on an individual idea. So on a $100,000 account, I\u2019d put $2,000 to $3,000 into each trade. \u00a0This way, if I take a few losses in a row, my overall account won\u2019t be depleted. If I was risking 10% of my account per trade and had 3-4 straight losses, that would deplete 2 things: Account Capital: When you lose 30%, you have to gain 43% to get to breakeven. And if you lose 50%, you have to double your account to get back to where you were. Psychological Capital: Major drawdowns hurt your confidence and ability to make good decisions. You may be tempted to revenge trade, which would probably cost you even more money. At the same time, I\u2019m looking to gain over 100%+ on each options trade. So as long as I maintain a decent batting average, my P&L has the potential to move up nicely. Position Sizing for New Traders If you\u2019re new to Power Plays Options, I want you to start small – even if you\u2019re an experienced pro with a $1 million+ account. I said above that I\u2019m willing to risk 2-3% of my options account on an individual idea. But I may go even smaller if I\u2019m trying out a new strategy, or working with a stock I don\u2019t know particularly well. It\u2019s okay to buy just one option contract while you get your feet wet. Buying multiple contracts gives you more flexibility for taking partial profits. But if you take a long-term view of your trading (which I hope you do), it\u2019s better to start small and gradually take more risk as you feel comfortable. Starting small also helps you figure out your psychological limits. If risking 3% on a trade keeps you up at night, then you know it\u2019s too much for you. And if you risk so little that you don\u2019t even care about a trade, then you\u2019re going too small. It might take you a little time to figure out the right balance for you. When Winning Is a Bad Thing Sometimes, the worst thing that can happen to a trader is making too much money too fast. Yes, it sounds counterintuitive. But imagine you have a $50,000 account. You put it all into one trade and double your money. You\u2019ll be happy in the moment. But you\u2019ll also have a warped sense of how risk and reward work – and you\u2019d probably blow out your account from taking too much risk on your next few trades. It\u2019s okay to shoot for big rewards. But remember that you can\u2019t get those rewards without taking a certain level of risk. So to wrap this up: Always Know What You\u2019re Willing to Lose Start With Small Positions, Even If They Feel Too Small Build Your Risk Tolerance Slowly And I’d recommend you follow these steps in any trading program you join, whether it’s Power Plays Options or anything else.<\/p>\n","protected":false},"author":4,"featured_media":75075,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[736],"tags":[],"class_list":["post-77861","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-scott-redler-dog-bytes"],"_links":{"self":[{"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/posts\/77861","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/comments?post=77861"}],"version-history":[{"count":4,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/posts\/77861\/revisions"}],"predecessor-version":[{"id":77865,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/posts\/77861\/revisions\/77865"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/media\/75075"}],"wp:attachment":[{"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/media?parent=77861"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/categories?post=77861"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.t3live.com\/wp-json\/wp\/v2\/tags?post=77861"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}