It’s Allocation! Allocation! Allocation!

When I talk to new (and even some veteran) traders when they are struggling with their trading, invariably one of the issues that they have is allocation.  Options traders should not characterize themselves as a “5 lot trader” or a “10 lot trader” as a futures trader may.  Futures traders typically manage their risk by ticks.  For example, they try to take 4 ticks out of their winners to risk 2 ticks on their losers.  That’s because the tick size is static.  That is not the case in options.  That is why you have to manage your CAPITAL AT RISK.  Click the video below as I discuss this in more detail.