Don't Blow Up

The number one goal when you start trading options isn't to make money. It's to not lose all your money. Sounds obvious, but most beginners blow up their accounts within the first few months. Here's how to not be one of them.

Rule 1: Never Risk More Than 5% Per Trade

If your account is $5,000, no single trade should cost more than $250. This means you can be wrong 20 times in a row and still have money left. You won't be wrong 20 times in a row — but knowing you can survive it keeps you calm.

Beginners blow up because they put 30-50% of their account into one "sure thing." Nothing in trading is a sure thing.

Rule 2: Always Know Your Max Loss Before Entering

When you buy an option, your max loss is the premium. That's simple. But make sure the dollar amount is something you can stomach losing completely. If losing $500 would ruin your week, trade smaller.

When you sell options, max loss can be much larger. Don't sell naked options as a beginner. Period.

Rule 3: Cut Losers at 50%

If your option drops to half of what you paid, sell it. You paid $3.00, it's at $1.50 — close it. You get $150 back instead of watching it go to zero.

"But what if it comes back?" Sometimes it does. Most of the time it doesn't. The $150 you recovered can fund a better trade.

Rule 4: Don't Chase Losses

You just lost $300 on a trade. The temptation is to immediately find another trade to "make it back." Don't. Revenge trades are emotional, oversized, and poorly timed. They usually make things worse.

After a loss, step away. Come back tomorrow. Review what happened. Then find a new trade based on logic, not frustration.

Rule 5: Avoid Weeklies Until You're Experienced

Weekly options (expiring within 7 days) are tempting because they're cheap. But time decay is brutal. Gamma makes them wildly volatile. They can go from profitable to worthless in hours.

Start with 30-45 day options. They give you room to breathe and room to be wrong then right.

Rule 6: Start with Paper Trading

Practice with fake money for at least a month. Learn the platform. See how theta decay actually feels. Make your mistakes for free.

Then start real trading with the smallest possible size. One contract at a time.

The Survival Checklist

Before every trade, answer:

• Can I afford to lose 100% of this premium?
• Is this less than 5% of my account?
• Do I have a profit target and stop loss?
• Am I trading because of a thesis, not an emotion?

If any answer is "no," don't trade.