§ 01
| Risk Rule | Guideline | Why |
|---|---|---|
| Position size | Max 2–5% of portfolio per trade | No single trade should threaten the portfolio |
| Portfolio delta | Keep net delta within target range | Prevents accidental directional bet |
| Correlation risk | Avoid concentrated sector exposure | 5 ‘different’ trades in the same sector = 1 big bet |
| Theta budget | Know your daily theta income/cost | Ensures time decay works for, not against you |
| Tail risk | Define max loss for every position | Spreads > naked options for risk definition |
§ 02
The #1 risk management rule: define max loss before entry. If you can’t state your max loss in dollars, you don’t understand your position. Use spreads instead of naked options to enforce defined risk.
§ 03
Review your current positions (if any). Calculate your net delta, total theta, and maximum loss per position. Are you comfortable with the worst-case scenario?
§ 04
You have 5 iron condors on 5 different stocks, each risking $500. A broad market selloff hits. What’s your actual risk?
§ 05
§ 06
Portfolio manager has $5M allocated to options positions. Gamma exposure: +$200K per 1% move. Vega: +$50K per 1 IV point. What's the RISK concentration?
Five questions · AI feedback
Sit with the ideas.
Your options portfolio has: net delta +150, net theta -$50, net vega +$200. What market scenario hurts you the most?
Why: