Position size is the first risk decision—not the last

Many trading plans begin with an entry. A resilient plan begins one step earlier: how much can be exposed if the idea is wrong?

Position sizing connects three facts—the capital available, the amount you are prepared to lose on one idea, and the distance to a logical invalidation point. If the stop must be wider because volatility is high, the position normally needs to be smaller.

This is especially important in options. Premium can move quickly, spreads can widen and overnight gaps can bypass an expected exit. Treat the maximum planned loss as a limit, not a target, and leave room for slippage and costs.

Consistency matters more than precision. A modest, repeatable risk rule makes it easier to evaluate a strategy over many trades without allowing one outcome to dominate the record.

Educational example only: define risk before entry, size from the invalidation point and never increase exposure simply to recover a previous loss.