Decide how many contracts to buy so that a total loss on one trade only costs the small slice of your account you set in advance. For a long option your max loss is the whole premium, so the premium you pay IS your risk. Set your account size, the percent you are willing to risk on one trade, and the option price - the calculator does the rest.
Your inputs
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Premium is quoted per share. One contract controls 100 shares, so $6.00 per share = $600 per contract. That $600 is the most a long option can lose, which is exactly why the premium is your risk.
What you can size
Contracts you can buy
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Dollars at risk
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Per contract cost
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Premium spent
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Leftover cash
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Account vs. this trade
At risk on this trade Rest of your account
Plain EnglishPosition sizing decides how many contracts to buy so that a total loss on the trade only costs the small slice of your account you set in advance, so one bad trade can never take you out. You pick the slice first (say 2%), and the math tells you the most contracts that fit inside it.
Three things to know about position sizing:
The premium is the risk. For a long option your max loss is generally the full premium you paid, so total premium spent is the number that must stay inside your risk budget.
Zero contracts is a real answer. When one contract already costs more than your risk slice, the right result is buy none - in practice you lower the risk budget, pick a cheaper option, or accept a smaller planned loss rather than force the trade.
Small slices keep you in the game. Risking a couple percent per trade is a rough guide, not a promise, but it means no single loss can take you out, which is the whole point of sizing.
Taxes are not shown here. Options and the underlying stock are taxed differently, and it depends on your holding period and account type. None of this is tax advice.