Is that a good rule of thumb when it comes to position sizing even when you buy ITM options so you'll never bet more than you can afford to lose?
yeah, felt obliged to think i might lose the whole premium and more comfy when decidin' to open my pos ans size em properly...mind u i only played hard direction so bot otm stuff.
funny that you mentioned it...I had a big overnight position in JBL( ITM puts + long stock). JBL issued a pre-warning and was down 17 in pre market. IB showed a huge loss on stocks , but no gains on puts (till 9:30). If I didn't had enough money on account , would IB close my position ( even if gains on intrinsic value of puts minus loss on stock was 8k and growing with every down tick).Maybe I should call IB and mention this scenario ; can happen in the future on the much larger scale
gotta luv those huge gappers down, innit...jbl today and josb/pozn few days ago..amazingly easy downtrends right off the gate.
It certainly is the most conservative,thats for sure.But why would you approach it so radically different than you would a stock?? Why not size it as a percent of equity and equate a stop value relative to $ value of an ATR stop on the underlying equity?? You will need to make an adjustment for delta and vega risk