Risk Capital for Options Trading
Beginning options traders often ask, “How much of my total trading capital should I devote to options trading?” To answer this question, you must decide how much of your total investment capital you are willing to use for high-risk trading. This individual decision depends on many factors, not the least of which is your tolerance for risk. If you are conservative, allot no more than 10 percent of your total investment capital for trading options.
After you have decided on an amount that you feel comfortable using for high-risk trading, commit only about 15 percent of that amount to any single options trade. For example, if you initially decide that of your $50,000 trading capital, you can devote $5,000 toward ...
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