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I would have lost over half a million had not gotten out Monday. I believe the grace of God helped me liquidate near 1000 flys on Monday one day before the break out. Sorry to everyone for the worst trade in history. On the bright side, I believe this loss made me a better person. It nearly took everything away from me and taught me not to take anything in life for granted because it all can be gone with one press of a button (in my case, many presses). It's only money. My biggest fear was this trade was going to take away my health, friends and family. A loss that would have ended everything. I know we traders want to make money trading, but I think if we focus too much on money, the more we tend lose it. Good trading is all about the process and not the money.

As much as I dont care for Vegas - I would go to Vegas rather than trade this stock.

Lets take a closer look at position sizing and why it is critical for your financial health. How much should one allocate to any given trade? The 2% – 6% rules have been introduced in Dr. Alexander Elder's book "Come Into My Trading Room". The 2% rule is to protect traders from any single terrible loss that can damage their accounts. With this rule traders risk only 2% of their capital on any single trades. This is for limiting loss to a small fraction of accounts. Besides a disastrous loss, a series of losses can also damage traders' account. The 6% rule is lent to handle this. Traders have to set the maximum of accumulated loss for a month. When they reach that level of loss, they have to stop opening any new position for rest of the month. These 2 rules are designed to protect traders from the two types of losses. For those who are able to accept the higher risk, they might adjust the 2% – 6% rules to 5% – 10%, where the 5% is used to protect the account from any single disastrous loss while the 10% rules is used to protect traders from any series of losses in each month. With our earnings straddles, if you limit your holding period to 3-6 days and don't hold through earnings, it is very unlikely to lose more than 20% in a single trade. In fact, most of our losers are in the 5-7% range. If you adapt the 2%-6% rule, then you can allocate 10% per trade, knowing that you don't risk more than 2% of your account. You can adjust it after each trade, monthly, quarterly, etc. It depends on your risk tolerance. Adjusting monthly seems like a good compromise. Of course theoretically, any options trade can lose 100%, but for some strategies, it is very unlikely. You should usually account for a "reasonable" scenario when considering your position sizing. The general idea is knowing in advance how much you risk on any given trade and allocate the capital accordingly. If it is absolutely critical for you not to lose more than 2% per trade, you can set a stop loss of 20% per trade. I personally don't do it for two reasons. First, many times you have couple of days of theta with flat IV and then IV jumps, reversing the loss. Second, with spreads, your fills are going to be terrible if you place stop loss order, much worse than you could get with limit orders. And third, like I mentioned, the loss is very unlikely to be more than 20% anyway. How many contracts should you trade? Position Sizing - The Most Important Trading Rule article has a good explanation of the concept. I’m not sure about you. But I’m tempted to borrow as much money as I can from my family, extended family, friends, friends of friends, and my banker. Not to mention selling off my retirement portfolio and using the highest leverage my broker offers. I’m tempted to enter the market with as many contracts as I can. Yet, this is a temptation that I MUST resist. This is because there is a 1% chance of losing everything. If this loss occurs, it is one that I can never recover from. Not only will my broker and banker be after me, I will find creditors instead of friends. It is a catastrophic loss. Here is another way to look at it. Lets say you have a trade which you keep through earnings and require the stock to move about 5% to realize the maximum profit. If it happened, you would realize a 40-45% gain, depending on your entry price. The trade would be profitable 8 out of 10 last cycles. However, when the stock moves less than expected and doesn't reach the long strike, the trade is a 100% loser. In comparison, you can have trades which are sold before earnings, producing an average gain of 8-12%, with very limited risk. It is very rare for those trades to lose more than 7-10%. What is better – to make 8 times 40% and to lose 2 times 100% or to make 10 times 10%? In the first case, your accumulative return is 120% (12% per trade). In the second case, it is “only” 100% (assuming 10% per trade). But here is the catch: those returns don’t account for position sizing. Let’s assume you want to risk 2% of your portfolio per trade. In the first case, you know that you will win most of the time, but when you lose, you can lose 100%. So you can allocate maximum of 2% of your account per trade, which gives you a total portfolio return of 24%. In the second trade, you can rarely lose more than 7-10%. The maximum loss I had with those trades was around 20%. So you can easily allocate 10% per trade, which gives you a total portfolio return of 100%. Now you see the difference? With the second trade, I can have much smaller average returns, but with proper allocation, I’m still way ahead. Despite all your efforts, you will eventually have a streak of 4-6 losers. Those who tell you they haven't, are either lying or haven't been in the game long enough. Always ask yourself: How will your account look after 5 straight losers? As a general guideline, I always recommend starting small. Allocate maybe 5-7% per trade and then increase it gradually. Always keep some cash reserve (I recommend at least 20-30%). As for total account size - do it gradually as well. Prove yourself that you can make money with 10k. Do it for 2-3 months. Then increase to 20k. Don't increase from 10k to 100k. The markets will be there long time after all of us are gone. Dr. Van Tharp has some very good articles about position sizing. I would highly recommend his books to learn more on the subject. How we use position sizing in our model portfolio In our model portfolio, we allocate 10% per trade. Since most of our trades risk around 25-30% (there are some exceptions), we basically risk up to 3% of our portfolio in each trade. In some strategies (like trades that we hold through earnings) we allocate half position, or 5% of the portfolio per trade. Those are higher risk trades that can potentially lose 50-80%. "Profits come in bunches. The trick when going sideways between home runs is not to lose too much in between." - Michael Covel Recommended reading: Van Tharp’s Definitive Guide To Position Sizing Money Management Strategies for Futures Traders A Trader’s Money Management System: How to Ensure Profit and Avoid the Risk of Ruin Want to learn how to trade options in a less risky way? Start Your Free Trial

True. There are many options (no pun intended) and one size does not fit all. I have accounts at tastyworks and Tradier (plus ONE) as well. I have tried many of others over the last decade plus, but for me, TOS is my choice and is worth the potential extra cost. (I didn't like the TOS comms for the very low priced SO trades...I use Tradier for that. But the bulk of my trading is not 20 cent spreads, so I use TOS.)

Nancy Reagan's words spring to mind": Just say NO (to the trade whether you have a toke or not is your business)

I was at 1.50 with TOS for years. About a year ago (maybe a bit longer), suddenly TOS became open to lowering the rates. I managed to get down to 0.75, and I know many others who also managed the same. I also heard that some managed to get down to 0.60, but they were doing very large volume. I do not know if they are still quite as accommodating. An added bonus for TOS, at least for me, is that customer support has been very good. That said, if the smart routing at IB really is much better than TOS, that could make a big difference. Ergo, my original question.

My plan is to forget about this stock and move on. I played along and took a small loss on 2 flies Monday. Borrowing from Harry Potter (Currently reading it with my 7 year old). TLRY = "He-Who-Must-Not-Be-Named"

Well, it’s not much, but I was able to make a decent profit selling put credit spreads on TLRY. On Monday, I sold the 12 Oct 140/135 put spread for $4.41 and just bought it back for $3.25 (23% profit on $5 spread). I also sold the 21 Sep 120/115 put spread for $3.20 and bought it back yesterday for $1.45 (35% profit). Give the volatility of the stock, I don’t think I’ll try this again, but wanted to report a slightly positive outcome. Many condolences and thanks to @clipsnation183 for suffering through a literal cautionary tale to help make us all better traders.

I wouldn't touch that. I haven't run the numbers, but it might not make sense with the fundamentals. Maybe you need to sell pot to every person on the planet and maybe aliens to justify the valuation.

I only had a couple of 105/115/125 iron flys opened for 10.50 credit - yesterday afternoon I bought back the call side of the trade for 7.30. I left the put side in play, figuring that with its sky high IV of near 300% (and 4x that of the calls) it would take a huge move below 105 for the put spread to trade near its width. I figured the risk/reward setup well for the put side to remain in play - of course it was easy to make this decision with only a couple of flys in play

Hi all. I have been following this trade idea with interest and could easily have been caught doing a few of these. I have reread a couple of articles from Kim and others and I would suggest that it is worth reading " How position sizing impacts your returns ". It is a great article to read. I have posted a question to Kim about how many is the max positions a trader should have open at any one time.

Wow. What a wild ride. I guess a straight call or call debit spread would have been the better play.