Options Jive

Monday – Friday | 8:40 – 9:00a CT

Options Prices and Trade Mechanics

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

After finding an underlying market and options strategy that fits our biases on volatility or direction, the rational next question has to do with trade size and management targets. Now that I have this trade idea, how many should I do and when should I take it off?

Today’s show answers those questions with a mix of trader experience and historical data. Tom and Tony talk about sizing trades and the idea of individual risk appetites. The guys show how to create a baseline risk level for options trading using the benchmark S&P 500.

From there, they move on to trade management, showing our mechanical management targets for all of the most popular options strategies. Finally, Tom takes the example of Strangles in the Utilities market (XLU) to show the audience how he’d size this trade and what he’d look to get out of it.

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