Contact Us
Course Content
Options Fundamentals
0/3
Call and Put Options Explained
Options Pricing and Greeks
Exercise and Assignment Process
Basic Options Strategies
In 2026, the most successful retail traders have moved away from "gambling" on high-leverage options and instead use Basic Options Strategies to create consistent cash flow and protect their existing portfolios.Here are the four essential strategies that form the foundation of a professional options toolkit.1. Covered Call (The Income Generator)This is the most popular strategy in 2026 for long-term investors. You sell a call option against shares you already own.Setup: Own 100 shares of a stock + Sell 1 Out-of-the-Money (OTM) Call.The Goal: To collect the Premium (cash) from the buyer while waiting for the stock to rise.The Outcome:Stock stays flat/down: You keep the shares and the cash.Stock hits the Strike: you sell your shares at a profit and keep the cash.Best For: Generating "synthetic dividends" on stocks you plan to hold anyway.2. Cash-Secured Put (The "Buy at a Discount" Strategy)Instead of buying a stock at the current market price, you get paid to wait for a better price.Setup: Have enough cash to buy 100 shares + Sell 1 OTM Put.The Goal: To get paid a premium to commit to buying a stock at a lower price (Strike Price).The Outcome:Stock stays above Strike: You keep the cash and try again next week.Stock drops below Strike: You are "assigned" the shares at the lower price you wanted, and your effective cost is even lower because of the premium you kept.3. Long Call & Long Put (The Directional Bets)These are the simplest forms of options trading, used to profit from a specific price move without owning the underlying asset.Long Call: You buy a call because you believe the price will go up significantly. It offers unlimited profit potential with limited risk (the premium paid).Long Put: You buy a put because you believe the price will go down. This is often used as "Insurance" to protect a portfolio during a market crash.4. Strategy Comparison TableStrategyMarket SentimentPrimary GoalRisk ProfileCovered CallNeutral to Slightly BullishIncome GenerationMedium (Stock can still fall)Cash-Secured PutNeutral to Slightly BullishBuy Stock CheaperMedium (Stock can still fall)Long CallAggressively BullishLeverage / ProfitLow (Only lose premium)Long PutAggressively BearishProfit / ProtectionLow (Only lose premium)5. The "Wheel" Strategy (The 2026 Professional Workflow)Many 2026 traders combine these into a cycle known as The Wheel:Sell Cash-Secured Puts until you are assigned shares.Once you own the shares, sell Covered Calls until the shares are called away.Repeat. This allows you to collect premiums at every stage of the market cycle.2026 Tactical Note: In today's high-volatility environment, professional traders typically look for 30–45 Days to Expiration (DTE). This provides the best balance between capturing Theta (Time Decay) and giving the trade enough time to work.💡 Student ExercisePick a "Blue Chip" stock (like Apple or Tesla). Look at the options chain for 30 days from now.How much cash would you receive today for selling a Covered Call 5% above the current price?If you did this every month, what would your "annual yield" be from premiums alone?
0/3
Covered Calls and Cash-Secured Puts
Long Calls and Puts
Options vs Stock Trading
Advanced Strategy Combinations
0/3
Spreads and Straddles
Iron Condors and Butterflies
Calendar and Diagonal Spreads
Risk Management and Psychology
0/3
Position Sizing for Options
Managing Winners and Losers
Avoiding Common Options Mistakes
Course Overview: Options Trading Masterclass

In 2026, Position Sizing is considered the single most important variable in an options trader’s survival. While a strategy determines what you trade, position sizing determines if you stay in the game after a string of losses.

In the high-speed 2026 market—characterized by AI-driven clusters of volatility—professional sizing has shifted toward mathematical models like the Kelly Criterion to balance growth and risk.

1. The Core Golden Rules (2026 Standard)

Most professional retail traders in 2026 follow the 1% to 2% Rule:

  • Never risk more than 1–2% of your total account equity on a single trade.

  • If you have a $50,000 account, your maximum loss on one trade should be $500 to $1,000.

  • Why? This allows you to survive a “Black Swan” event or a 10-trade losing streak without blowing up your account.

2. The Position Sizing Formula

To find the exact number of contracts to buy, use this standard 2026 calculation:

$$Position Size = \frac{Total Account Risk ($)}{Risk Per Contract ($)}$$

Step-by-Step Example:

  1. Account Risk: You have $10,000 and want to risk 2% ($200).

  2. Trade Risk: You buy a Call for $3.00 ($300) and set a stop-loss at $2.00 ($200). Your risk per contract is $100.

  3. The Result: $200 (Account Risk) / $100 (Trade Risk) = 2 Contracts.

3. The Kelly Criterion: The “Scientific” Approach

Advanced 2026 traders use the Kelly Criterion to determine the optimal fraction of their portfolio to wager based on their historical “edge.“

The formula is:

$$f^* = \frac{bp – q}{b}$$

  • $f^*$: The fraction of your portfolio to bet.

  • $p$: Probability of winning (your win rate).

  • $q$: Probability of losing ($1 – p$).

  • $b$: The payout ratio (Profit / Loss).

2026 Pro Tip: Most traders use “Fractional Kelly” (e.g., Half-Kelly or Quarter-Kelly). If the formula suggests 10%, they only risk 2.5% or 5% to reduce emotional stress and account drawdowns.

4. Sizing Based on Strategy Type

In 2026, your sizing must adjust based on the nature of the risk:

Strategy Type Sizing Logic Risk Note
Long Calls/Puts 100% Risk. Assume the premium can go to zero. Sizing should be very small (1-2% of account).
Credit Spreads Defined Risk. Size based on the “Width of the Spread.” Much safer than naked options; allows for slightly larger sizing.
Naked Options Buying Power/Notional. High Danger. In 2026, many brokers require a $5,000 minimum equity for these positions.

5. 2026 Dynamic Adjustments

  • Volatility Weighting: In 2026, if the VIX (Volatility Index) is above 30, pros reduce their position sizes by 50% because price swings are wider.

  • Correlation Check: Don’t put 2% into Apple Calls and 2% into Microsoft Calls at the same time. In a tech sell-off, these act as one single 4% risk position.

Previous
Next