Part11 Trading Master ClassRatio Spread
When to Use: Expect limited move in one direction.
How It Works: Buy 1 option, sell multiple options at different strikes.
Risk: Unlimited on one side if not hedged.
Diagonal Spread
When to Use: Expect gradual move over time.
How It Works: Buy long-term option at one strike, sell short-term option at different strike.
Risk Management in Options
Even though options can limit loss, traders often misuse them and blow accounts.
Key risk tips:
Never risk more than 2–3% of capital on one trade.
Understand implied volatility — high IV inflates premiums.
Avoid selling naked options without sufficient margin.
Always set stop-loss rules.
