The #1 Mistake New Traders Make — And How to Avoid It with Smarter Sizing
Position sizing and diversification are key strategies for managing risk in options trading. By carefully deciding how much capital to allocate per trade and diversifying across assets, traders can better control risk, especially in volatile markets.
What Is Position Sizing?
Position sizing helps control risk by limiting exposure to a single trade. In options, this is particularly important due to leveraged positions.
- Example: If you’re trading a WETH/USDC option with $1,000 in capital, setting a 2% risk per trade means you’re risking $20, helping manage potential losses.
How to Calculate Optimal Position Size on Stryke
Using a fixed percentage of capital per trade can keep risk manageable. Start small and gradually increase based on experience.
- Practical Tip: For example, if your total capital is $1,000 and you’re comfortable risking 2% per trade, your position size would be $20 for a WBTC/USDC or ARB/USDC option.
Diversification in Action
Diversification spreads risk across different assets, reducing the impact of one asset’s volatility on your overall portfolio.
- Example: Holding options on both WETH/USDC and BRETT/WETH pairs reduces the risk of being overly dependent on a single asset’s performance.
- Scenarios: Diversifying with WETH/USDT and ARB/USDC call options while holding a put on another pair can help offset losses across varying market conditions.
Visual Guide: Position Sizing & Diversification
Here’s a quick infographic that shows how to apply these principles on Stryke.
This visual highlights:
- Why options are safer compared to spot/futures.
- The importance of sizing positions at just 1–2% risk per trade.
- How diversification works across WETH, ARB, BRETT, WMNT, etc.
- Stryke’s built-in tools (PnL tracking, Greeks, auto/limit exercise, portfolio view) to manage risk effectively.
You can use this as a checklist before every trade to ensure you’re not overexposed and are spreading your positions wisely.
Tools on Stryke for Monitoring Your Portfolio
Stryke’s trading dashboard shows asset breakdowns and profit/loss, making it easy to assess and adjust your diversification strategy.
- See exposure across assets.
- Track PnL live.
- Adjust allocation based on market conditions.
Key Takeaways
- Size Smart: Risk a consistent percentage (1–2%) per trade.
- Diversify Wisely: Spread options across multiple pairs (WETH, BRETT, ARB, WMNT).
- Use Stryke’s Tools: Portfolio view, Greeks, and auto/limit exercise help you stay disciplined.
Next Up
In the final post of this series, we’ll dive into hedging strategies — the ultimate step in risk management. You’ll see how to safeguard your portfolio during volatility while staying positioned to capture gains when the market pumps.
About Stryke
Stryke is a decentralised options protocol that focuses on maximising liquidity and enhancing gains for option buyers while minimising losses for option writers—all in a passive approach.Stryke employs option pools that enable anyone to effortlessly earn yield. The protocol provides value to both option sellers and buyers by ensuring equitable and optimised prices for options at various strike prices and expiries, achieved through our proprietary, cutting-edge option pricing model designed to mirror volatility smiles.
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