Options Risk Management for Beginners

Patricia Saylor
Mar 30
3 min read

How to Really Trade Options Safely:

If you're learning to trade options, you've probably heard a lot of hype—but not much about what could go wrong.

This post is here to change that.

Options can be a powerful tool, but only if you understand the risks and manage them intentionally. In this post (based on my Options Insights video series), I’ll walk you through common pitfalls, beginner-safe strategies, and a real example of how I manage risk using a cash-secured put.

Why Risk Management Matters in Options Trading

Trading options can be safe—but only if you fully understand the trade-offs.

A lot of beginners start with buying options. After all, the risk is limited to the amount you pay, right?

That’s true—but here’s the catch:📉 If the trade doesn’t go your way before expiration, you lose 100% of your investment.📆 These trades often expire fast and are low probability, especially if you’re buying cheap, out-of-the-money options.

You have to be right about your predictions and the timing to make money when you’re buying options.

What About Spreads?

Spreads (like vertical credit or debit spreads) are often marketed as "defined-risk strategies."And that’s true at first. But…

You can still lose the entire width of the spread, minus your premium received.
If the trade turns against you and you try to repair the spread by widening it, you’re increasing your capital at risk.
Many beginners unknowingly commit a large percentage of a small account, turning one mistake into a big loss.

Hoping your wins will make up for your expected losses? That’s not a strategy. That’s gambling.

The Safest Option Strategies for Beginners

If you want to start smart, there are two strategies I recommend again and again:

✅ 1. Cash-Secured Puts

You’re paid a premium up front—cash that hits your account immediately—for agreeing to buy 100 shares of a stock or ETF you already want to own.

That premium is yours to keep no matter what happens next.
If you’re assigned, you’re buying shares at a price you chose, not one that caught you off guard.
You’re also getting them at a discount from where the stock was trading when you first placed the trade.

It’s not just about reducing risk—it’s about being in control of your investing decisions.

✅ 2. Covered Calls

You already own the shares. You sell a call at a price higher than your breakeven. You either:

Keep the premium if the stock stays below the strike
Get paid to sell your shares at a profit if the stock rises

These aren’t home runs—they’re steady, income-generating strategies that support long-term investing.

Real Example: Selling a Cash-Secured Put on KO (Coca-Cola)

In my video, I walk through a real-time trade on the Schwab Thinkorswim platform:👉 Selling a cash-secured put on Coca-Cola (ticker: KO)

At the time of the trade, KO was trading just above $70 per share. I chose a strike price of $70, and I was paid $94 up front for making that agreement.

That $94 premium was deposited into my account immediately—and I keep it no matter what happens next.

Two Possible Outcomes:

KO stays above $70 by expiration➤ The put expires worthless. I never buy the shares—and I still keep the full $94.
KO drops below $70➤ I’m assigned to buy 100 shares of KO at $70 per share—a price I chose intentionally when I placed the trade.➤ Since I collected $94 in premium, my net cost basis is just over $69 per share.

Either outcome is a win:✔️ I either earn income without buying shares, or✔️ I buy a solid company at a discount and still keep the premium.

And best of all, I show you exactly how to do it—step by step on the Thinkorswim trading platform—so you can follow along in real time.

Want to Learn More?

📘 I cover this—and much more—in my ebook: Beginner’s Guide to Safe Options Trading, simple language, real-life examples, and step-by-step guidance.It’s not quite “explain it like I’m five,” but it’s close.

👉 Get it on Kindle for $4.99 and read on your computer, tablet or Kindle.

Watch the Full Video

🎥 Prefer to watch and learn? This post is based on my Options Insights video series on YouTube.

Final Thoughts

Options trading doesn’t have to be risky—if you understand the risk going in. Know your max cost. Be happy with either outcome. Get paid up front.

That’s not gambling. That’s investing with confidence.