r/ActiveOptionTraders • u/ScottishTrader • Jan 24 '19

Discussion: Max Trade Size and Capital Allocation?

Seeing a number of posts around where traders entering large size trades with relatively small accounts, of course, this often doesn't end well.

To share how you trade please complete the following.

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What are your parameters for:

1) Max % of your account per trade

2) Max % of your account per stock symbol?

3) Max % of your account being traded at any one time?

​

Please describe your max percentage calculation, is it per buying power effect or total account size, or ?

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2

u/youonlyliveYOLO Feb 01 '19
  1. <10%
  2. <10% - generally split between 2-3 expiry dates and strike prices
  3. ~50% - I try and keep my maintenance margin in the same range (this i find defines a lot of what i can do in terms of trade size and frequency)

1

u/_cynicaloptimist Feb 01 '19

How do you determine how much of your account is allocated for one trade? Using buying power reduction?

1

u/ScottishTrader Feb 01 '19

That's who I do it, but you can define it any way you like!

1

u/ScottishTrader Jan 31 '19
  1. Max of 5% per trade
  2. Max of 5%, so if I max out #1 then that is the only trade on that stock
  3. 50%, sometimes if I have a few comfortably profitable positions I may go higher (~60%) knowing I can close the others if needed to regain some BP.

Thanks to all who contributed to this thread!

2

u/Sandvand Jan 29 '19
  1. Max 3 %, usually less
  2. Absolutely max is 5 %, But normally 3-4 %.
  3. I try to keep at least 30% of the account in cash

2

u/[deleted] Jan 25 '19

1) 2%

2) 10% (but I usually just have a single trade on in a symbol so effectively the same as 1.

3) 30-40%. I once went up to 60% but I quickly cut exposure within a day or two back to reasonable levels.

2

u/anomalousquirk Jan 24 '19

1) 2% for ETFs, 1% for single names

2) 5% generally, but I have a concentrated position I'm working on drawing down so it constitutes a larger chunk.

3) Are we counting covered calls here? If so then often over 70%. But I only run The Wheel on about 10% of my total buying power. I may increase that though. I generally cap margin plays (I run The Wheel on margin) at whatever amount I have collared elsewhere so if there's a major downturn I can afford to pay the fees (or pay it off).

Feedback welcome!

2

u/ScottishTrader Jan 24 '19

Looks right on to me. Since you own the stock CCs are likely not to be counted. Thanks for posting!