 Hey guys, this is Haider from Xtrades, and in this video we're gonna go over how to manage risk properly with options trading So the first thing with options trading that you have to know is the options trading is very risky Because it's a lot more volatile compared to trading shares, right? So, yeah options trading The contract prices move very quickly. So it's a very volatile a small move can Like for example a 1% move in a stock could equal to a 50% move in an option contract, right? so Option contracts move very very quickly. So you have to size accordingly as well since it's very volatile You want to make sure that you are sizing very small So that's yeah, very important if you're trading 10,000 with If you're trading 10,000 and you use that money to trade shares then you would want to Divide that by 10 and that's how much you should be trading with the options. It's a good demo rule Next thing expiration date. So with options trading There's this thing called data. So data eats up your contract if the stock doesn't end up moving if it ends up going Like let's say you have a call So you're betting that a stock is gonna go up and if the stock goes flat you could So flat So right that's the three things the stock could do if it goes up you could make money You could make lots of money But if it goes up, but it goes up very slowly then you could also lose money because of this thing called data So that is a very important concept in options trading especially when it comes to risk management so you want to You want to choose a right expiration date or a proper expiration date to manage risk accordingly If you are going for a day trade then playing weekly contracts is fine If you're going for swing trades, you want to go for monthly contracts Two to three months is usually the max I would go but usually at least one month would be good for swing trades And then for longer term plays like leaps you would want to go out one year, right? So make sure that you are properly You're using the proper expiration date. So for example if I'm trying to swing trade I should not use a weekly contract because data will kill me, right? Even if the stock moves up It has to move up fast enough where data doesn't kill me with an weekly contract But if you're day trading, that's completely fine. So Yeah, even if your stock goes up, you could still lose money Even if it goes flat, you could lose money, right? And if it goes down, obviously you would lose money But with shares, it's not like that. So with options trading, it's different. So you gotta you gotta account for that Next thing you want to choose At the I typically choose at the money or the closest out of the money strike. So these are typically lower risk And less volatile compared to more out of the money the more out of the money you go the more of a lottery Trade that it becomes because it's very unlikely that it can make that big of a move or that option contract to Actually move, right? So this is coming back to data. If you go at the money, you lose or you have less Less effect. Data has a left less effect on your contract the closer you are to at the money or Out of the money, right? So typically the closer you are to Stock price, that's the best right to choose because you have less You have data has a less data has less effect on your contract So yeah, typically you would want to choose at the money or closest under the money straight next thing market orders versus limit orders So if you're trading a liquid stock like Amazon or Apple, then it really doesn't matter too much You could do a market order and it should be fine, right? but For the liquid stocks For example, there's some like growth Growth tech stocks, right? Some small cap growth tech stocks for those type of stocks. You would want to use limit orders Because they are typically a little bit less liquid. But with the big cap tech stocks like Apple, Amazon, Microsoft, Meta You should be good and market orders are fine So yeah, definitely something to consider if you're playing the Less popular stocks, you want to use limit orders and then With options trading you definitely want to be buying a little bit before the key levels If you're buying at a breakout option prices tend to inflate and Premium, yeah premium gets inflated. So typically with options trading you want to try to anticipate more and Buy a little bit before the break out That's a secret tip that a lot of people don't really know but Well, for example, with stock trading you can buy on the break on that's completely fine But with options trading you can't do that because of the Premium inflation, right? And then, you know, also you want to make sure that you're not over trading with options trading Options trading should be used only when you see an A-plus opportunity Otherwise, you should just be trading with shares because a lot of stocks they don't trade that cleanly For example Pinterest has been chopping around for quite some time now Take a look at the weekly chart, right? All of this is just chopped. If you were playing any options around this time It's highly unlikely that you made money because just how choppy the stock is, right? But with shares you could trade this type of stuff but with options you definitely can so you want to be very picky and Make sure that you're not over trading and you want to be choosing the stocks that have a lot of momentum So UPSD is like good stock UPSD had a really nice run here So you want to choose stocks that have potential to actually run and not stocks that can chop And yeah, you want to minimize over trading as much as possible And use options trading fairly the best of the best trades only Otherwise you could use stock shares or just shares and then yeah speed is very important Especially for day trading Option trading with option trading contract prices move very very quickly and are very volatile like I said before So speed is very key You want to make sure that you're executing right at the breakout or right before the breakout ideally And then you want to make sure that you're selling very quickly and you have to constantly be monitoring the contract And with options trading you can't set stop losses So when the price triggers your stop loss then you have to manually go into your broker and sell the option contract But yeah, that's pretty much all I got Thank you guys for tuning in