Position Sizing Calculator
Determine exactly how many contracts your account can support at a given strike price. Size positions correctly to manage risk and preserve capital.
Position Sizing for the Wheel Strategy
Position sizing is the single most important risk management decision an options seller makes. Selling too many contracts relative to your account turns a high-probability strategy into a portfolio wipeout waiting to happen. The calculator above helps you answer the fundamental question: how many contracts can I safely sell?
The 5-10% Rule
A widely adopted guideline among wheel traders is to allocate no more than 5% of total account value to any single underlying position. Conservative traders cap it at 3-5%, while more aggressive sellers may stretch to 10%. The logic is simple: even if a stock drops 30-40% and you get assigned, a single position sized at 5% limits the portfolio impact to roughly 1.5-2% — painful but survivable.
With a $100,000 account at 5% risk per position, you would commit at most $5,000 per underlying. For a stock with a $50 put strike, that means selling exactly 1 contract ($50 x 100 = $5,000). Increasing to 10% would allow 2 contracts — but now a single adverse move affects twice as much of your capital.
Kelly Criterion and Optimal Sizing
For those who want a mathematically rigorous framework, the Kelly criterion calculates the optimal bet size based on your edge and win rate. The formula is f* = (bp - q) / b where b is the ratio of profit to loss, p is the probability of winning, and q is the probability of losing. For cash-secured put sellers with a typical 70-85% win rate, full Kelly often suggests aggressive sizing — which is why most practitioners use half-Kelly or quarter-Kelly to smooth out drawdowns. In practice, half-Kelly tends to align closely with the 5% per-position rule for most strike selections.
Diversification Across Underlyings
Position sizing is only half the equation — the other half is diversification. Selling puts on five different $50 stocks at 5% each means 25% of your capital is deployed, which is reasonable. But if all five are tech stocks, a sector sell-off hits them all simultaneously. Effective wheel traders spread positions across sectors (technology, healthcare, financials, consumer staples) and stagger expirations so that not all contracts expire in the same week.
A common portfolio construction target is 6-10 simultaneous wheel positions at 5% each, deploying 30-50% of the account with the remainder held as a cash reserve for adjustments, rolling, or adding new positions after pullbacks.
When to Adjust Position Size
Recalculate your position size whenever your account value changes meaningfully — after a large win, after assignment, or at the start of each month. As your account grows, the number of contracts you can sell at a given strike naturally increases. Conversely, after a drawdown you should reduce contract count to avoid compounding losses.
Key Formulas
Max Capital per Position = Account Size × Max Risk %
Capital per Contract = Strike Price × 100
Max Contracts = ⌊Max Capital / Capital per Contract⌋
Kelly Criterion: f* = (bp − q) / b
Frequently Asked Questions
How many contracts should I sell on one stock?
A common guideline is to risk no more than 5% of your total account per position. Divide your max capital per position by the strike price × 100 to get your contract count. For a $100,000 account at 5% risk, you can sell 1 contract on a $50 strike put ($5,000 capital required).
What is the 5% rule for options selling?
The 5% rule means allocating no more than 5% of your total portfolio to a single underlying position. This limits the damage from any one stock dropping significantly after assignment. Conservative traders use 3%, aggressive traders stretch to 10%.
How does the Kelly criterion apply to options selling?
The Kelly criterion calculates optimal bet size as f* = (bp - q) / b, where b is the profit/loss ratio, p is win probability, and q is loss probability. For CSP sellers with 75% win rates, full Kelly often suggests aggressive sizing. Most practitioners use half-Kelly or quarter-Kelly to reduce drawdowns.
How many different stocks should I wheel at once?
Most wheel traders run 6-10 simultaneous positions across different sectors, deploying 30-50% of their account. The rest stays in cash as a reserve for adjustments, new positions after pullbacks, or rolling existing trades.
Should I recalculate position size after a loss?
Yes. After a drawdown, recalculate based on your current account value. This automatically reduces contract count, preventing you from compounding losses. Conversely, as your account grows, you can gradually increase position sizes.
Options involve risk and are not suitable for all investors. All calculations are estimates — actual results will vary. Not financial advice. Full disclosure