Introduction
These five iron rules weren’t learned from a book — they were distilled from actual losses. Behind each one is a trade that cost me dearly.
Rule 1: Never Exceed 50% Margin Utilization
Maxing out your margin is backing yourself into a corner — one market move and you have no room to roll.
Standard: Used margin / Total account value < 50% at all times.
Rule 2: Reassess Immediately When Price Breaks 7% Past Strike
Not “cut immediately” — reassess immediately. What’s the Delta? How much Theta remains? How many days left?
If Delta > 0.60 and Theta is nearly zero, act now.
Rule 3: No New Positions 3 Days Before Earnings
IV swings wildly around earnings — the natural enemy of sellers. After earnings, use IV Crush to close existing positions.
Exception: Deliberately selling high IV before earnings (requires advanced judgment).
Rule 4: Review All Positions the Day Before FOMC
Market sentiment is extremely unstable before Fed decision days. Confirm every position’s max loss and remaining margin the day before.
Rule 5: Rolling Is Not Escaping — It’s Rebuilding Win Rate
Many people treat rolling as a tool to avoid losses. This is wrong.
Rolling means: I acknowledge this position’s win rate is no longer sufficient, and I choose to exchange capital for a better probability structure.
If your reason for rolling is “betting it will bounce back,” that’s not rolling — that’s adding to a losing position.
Disclaimer
The above is personal trading experience and does not constitute investment advice. Options trading involves high risk. Please evaluate your own financial situation.
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