Risks of Options Trading

Understanding the risks of options trading is essential for protecting your capital and making informed decisions.

Common Risks

  • Buying options = high risk of total loss
  • Selling naked calls = unlimited loss
  • Earnings trading = IV crush risk
  • Illiquid options = poor fills
  • Bad risk management = inconsistent results

Best Practices

  • Trade liquid tickers
  • Risk 1–2% per trade
  • Prefer defined-risk strategies
  • Avoid zero-day expirations if new
  • Track your data

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