The 3 Rules I Use As An Options Seller To Never Overtrade Or Have Large Losses
Summary
Austin shares three mechanical rules to prevent over-leveraging in options trading: limiting active buying power to 30-50% of your account, using small stop losses or defined-risk spreads, and adjusting position sizing based on market trends. He emphasizes capital preservation by parking idle cash in risk-free assets like T-Bills and warns against large losses that require massive returns to recover.
Topics discussed
Introduction: Three rules to prevent account-wrecking losses
Personal story: A $15,000 overnight loss and the need for change
Rule 1: Buying power allocation by risk tolerance (30-50%)
Why limit buying power? Managing margin calls and volatility
Earning interest on idle cash using S-Gov and T-Bills
Rule 2: Stop loss management and the 100-200% rule
Alternative: Using spreads to define risk for short-term trades
The math of recovery: Why small, frequent losses are safer
Rule 3: Position sizing based on market trend indicators
Adjusting trade count during bullish pullback zones
Conclusion and free course recommendation
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