In options trading, risk management starts with defined risk and ends with position sizing. "Stop Losses" -- if used at all -- center around price action of the underlying and give zero weight to the value of the option(s) itself.

As an options trader, nothing makes me cringe more than hearing about people "protecting" their open options positions with Stop Loss orders.

In this episode, I discuss the proper way to manage your risk in new trades and why stop loss orders (and by extension market orders) are a TERRIBLE idea in options trading.