Position sizing
How many contracts, decided from the maximum loss you accept. Worked out before opening; after that it is negotiating with yourself.
In the chapter
The decisions, in order
From the same chapter
- Directional thesisWhat you expect the underlying to do, with a horizon and a size. Without all three you cannot choose strike or expiry: only buy for the sake of buying.
- Exit planAt what price or on what date you close, written before entering. An option can run out of time while you wait to be proved right.