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How can I manage risk while trading Options?
How can I manage risk while trading Options?
Updated over a week ago

Options trading carries risks. Buying Options risks losing the entire cost, or premium, of the Option if the market moves unfavorably. Selling Options, referred to as going short, poses potential limitless losses if the market moves against your position.

Where to start

  • Educate yourself: Understand Option concepts, strategies, and risks before entering positions. Stay informed about market conditions, upcoming earnings & dividend dates, corporate actions, and other events that may affect your Option positions.

  • Check for liquidity: Prioritize trading Options for symbols (Stocks & ETFs) with good liquidity - this will help you more easily get in and out of a position. Similarly, trade Option contracts with high liquidity. Options with strong liquidity usually have tighter bid/ask spreads, high volume (contracts traded) & open interest (contracts open).

  • Leverage tools: Utilize resources like the Greeks, which provide a way to measure the sensitivity of an Option's price to quantifiable factors, and profit & loss charts to visualize potential profit and risk outcomes at various stock prices to make more informed decisions. Pay attention to notifications that let you know when your Option becomes in-the-money or if an upcoming expiration is approaching.

  • Understand implied volatility: Be aware of implied volatility and its impact on Option prices. Adjust your strategies to accommodate changes in volatility and market conditions.

Manage your portfolio: Regularly review your Options positions and overall portfolio. Adjust your strategies based on changing market conditions, your risk tolerance, and liquidity needs.

For further questions please contact Member Support via in-app chat or email at

Options carry significant risk and are not suitable for all investors. Options investors can rapidly lose the value of their investment in a short period of time and incur permanent loss by expiration date. Certain complex options strategies carry additional risk. There are additional costs associated with option strategies that call for multiple purchases and sales of options. Supporting documentation for any claims will be furnished upon request. Prior to buying or selling an option, investors must read and understand the “Characteristics and Risks of Standardized Options,” which can be found at: See full terms of the Options Order Flow Rebate Program at Rebate rates are subject to change for new and existing enrollees.

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