 Hey everyone, welcome to another video lesson from navigationtrading.com. In this video, I wanna talk about analyzing risk on futures options. Now, everybody wants to talk about the upside, everybody wants to talk about the wins, everyone wants to talk about the profits, but it's equally as important, if not more important to understand the risk of a trade before you put it on. Now, we're looking at an example here in the Thinkorswim platform of a short strangle on oil. And I know I've been on a kick on this whole risk and keeping your position size in check, but it's so, so important. So I am going to continue to beat this into your head as much as possible to make sure that everyone understands it. So what we're looking at here is a short strangle, 43 days to expiration right in the wheelhouse of where we like to put them on. And you can see I've got three different price slices set up on the analyze page. And the reason I do this is because I want one right at the money, and then I want a couple of examples out of the range to the downside and out of the range to the upside. And what you can do is these price slices are then noted with the different figures and the Greeks down here, along with the margin requirement. Okay, so what I want to drive home is a couple things. In our Futures on Options course, we talk about span margin and how that can fluctuate, right? It can fluctuate, the buying power requirement can get larger as you get closer and closer to expiration. And they also have the ability to increase margin requirement in very volatile times. I've seen it happen several times where things got crazy in a certain market and they came and really expanded the amount of margin that you needed to have in your account to hold that position. So if you've got a position going against you, okay? So you're already down money on the position and then they also expand the capital requirement. That can sometimes put you in a bind if you don't have your position size in check relative to your account size. So let me give you a quick example with these price slices to give you an idea. If we put this on today and you look at where price is currently trading right here in the middle, where this price slices, if you come down to this price slice where it's noted as $53.73, $53.73 up on the screen, if you follow this over under margin requirement, it's gonna cost you in buying power about $2,100 to put this trade on initially. Now again, that can expand as you get closer into expiration. So that's the initial margin requirement which can change. The other thing is look at now the margin requirement on these price slices to the upside and the downside. The upside at 64.05, we're looking at a margin requirement now of over $4,600. That's huge to understand because think about this, if oil makes a sharp move up and we're looking at, in fact, let's just move the dates. Let's say it has a big move within a week and it moves all the way up here, blows through your break even and you're sitting right here. Well, look where we're at from a P&L standpoint. On the pink line, we're down $3,000 on this trade. But in addition to that, we now have a margin requirement of over $4,600. So your accounts down 3,000 and your account is also required to put up 4,600 instead of 2,000 on that trade. So you can see how that's kind of a double whammy. Your accounts down because of the loss on the trade, margin expands. So you're required to hold more in your account on that trade. That's where it can really start to flip your account and get to the point where you thought you were keeping your position size small. Now you realize, oh my gosh, this is actually not as small as I'd hope for my account size. Now I'm telling you this from experience. This is not a theoretical thing that I'm just coming up with. This is something that I learned the hard way back when I didn't quite understand span margining and options on futures. And that's why I wanna relay it to you so you don't get yourself in that same kind of a bind. So just be smart about your trading, keep your position size really small. That is the only defense you have against managing against huge massive one directional moves. If you don't have your position size in check, that's when you're gonna get squeezed out of a trade. You're gonna have to book that loss. You're not gonna be able to get it back. But if you stay small, you can manage out of these massive moves in one direction or another. The goal in trading is to continue to hit doubles and singles. Book profits, add positions. Book profits, add positions. And being able to manage your risk in a way that lets you live to trade another day. When you blow out your account or you have a massive loss in your account, not only does it obviously hurt your profits, but it hurts the psychology and your emotional mindset about trading as well. Trading is much about strategy as it is about mindset and you have to keep both in check and keeping your position size in check is the number one key to doing so. I hope this is helpful. If you wanna check out everything else we're doing, check us out at navigationtrading.com. See you next time.