Contracts that fit
1
Options position size calculator
How many contracts can you trade without breaking your own risk rules? Enter your account size, how much you risk per trade and what one contract can lose.
Risk budget
$500.00
Risked at that size
$436.07
A sizing rule, not a recommendation. For trades with no fixed max loss, enter a stress loss.
The formula
Contracts = round down (account × max risk % ÷ (max loss per contract + fees))
With a $25,000 account, 2% max risk and an iron condor that can lose $433.47 plus $2.60 in fees per contract: 25,000 × 0.02 ÷ 436.07 = 1.15, so 1 contracts.
Adding a Kelly limit
A fixed percentage ignores whether the trade is any good. The Kelly criterion sizes by edge: f = p − q ÷ b, where p is the chance of a win, q the chance of a loss and b the average win divided by the average loss. If f is zero or negative, the trade has no edge under those numbers, and Kelly says to risk nothing.
Full Kelly assumes your probabilities are exact, and they never are, so it swings hard. Options Verdict uses an eighth of Kelly by default and never more than your max risk rule. Enter a profit chance and win/loss ratio above to see the limit.
Questions
How much should I risk per options trade?
Many traders cap each trade at 1% to 2% of their account. It's a rule of thumb, not advice: the right number depends on your goals, how many trades you hold at once and how much loss you can stomach.
What do I use as max loss for an uncapped trade?
For short strangles, naked puts or covered calls there's no fixed max loss, so use a stress loss: what the trade would lose on a large move, such as three standard deviations or a 20% gap. Options Verdict calculates this for you.
What is the Kelly criterion?
A formula for the share of your account to risk that maximizes long-run growth, given your win rate and the ratio of average win to average loss: f = p − q ÷ b. Full Kelly is very aggressive and assumes your numbers are exact, so traders who use it usually take a small fraction of it.
Should I count margin or buying power?
Size on what you can lose, not on the margin your broker holds. For defined-risk spreads the two are usually the same.
More tools
- Options profit calculatorPayoff, max profit and loss for 20 strategies.
- Expected value calculatorWhat a trade makes on average, from realized volatility.
- Probability of profit calculatorThe market-implied chance a trade ends with a profit.
- Expected move calculatorHow far the market expects a stock to move.