An Options Trading Management Consideration

Tom Gentile

Posted in
Options Trading

By: Tom Gentile
December 19th, 2022

2 mins read

For your Consideration: Cost as Risk

Here is a consideration for you on how to manage your trading and Risk/Reward: There a couple of ways one can go about a stop loss.

  1. Use a percentage stop loss, or 
  2. Use cost as risk

We teach and use case studies based on a theoretical 25k account in which no more than 2% is at risk on any one trade, meaning no more than $500 risk per trade.

Stop Loss

If you go with a 50% stop loss rule that means one can set up a trade that cost $1,000 and at a 50% stop you would lose $500 but preserve the remaining $500,

But… how many times have you stopped out at a 50% stop only to see the trade turn around and work? Frustrating, right?

Cost as Risk

How about spending only your max risk or $500 on the trade to begin with. You will have less contracts and therefore less profit potential, but you will not have an arbitrary stop loss percentage potentially taking you out too soon if you are willing to risk the full $500.

This way the market and your position’s underlying security can bounce around all it wants and unless its value reaches zero you can maintain the trade and stay in it a bit longer, giving it a chance to work out.

It keeps you from having to over-manage it and all its gyrations as well. This should result in less stress in your trading, which we find is a benefit utilizing Cost as Risk in our options trade management.

Position-Sizing Example: if your ‘max risk’ is $500 and the cost of one option is $2.50, that would allow you to ‘open’ two contracts, equaling $500 cost.

Go with the one you find suits your personality best.

App: Toms Option Tools

Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.

Other times I will have other charts may work to amplify my educational points. 

Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.

Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.


Stock and options trading has large potential rewards, but also large potential risk.

You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.

This is neither an offer to buy/sell/ or recommend a particular stock or option.

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.

No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.

Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.

This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.

You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any I, investment decision made, or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.

Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.

Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.

A full disclaimer can be found here:

Sign Up Now for Free Education!