Options Trading Beginner

In setting a suitable money management, you should also consider the maximum drawdown you are willing to accept, which depend on your risk tolerance.
In this case, do take into account the reasonable percent return required to recover to breakeven when you experience a certain percent of losses (drawdown), as discussed in the previous post....

One important part of money management/position sizing is the ability of a trader/investor to avoid large draw downs or limit the draw downs to a certain percentage of the trading capital/portfolio.
If the traders/investors always take high risk in their trades, they are more likely to experience disastrous drawdown. Therefore, the way to avoid it is by limiting the size of what you are prepared to lose / risk in any single trade to a certain percentage...

The main reason why money management / position sizing is extremely important is capital preservation ….. to avoid the risk of ruin from a losing streak.
So long as you have the money / capital to trade, you would still have a chance to recover your losses. However, if your capital is gone, you would have no chance at all to recover, as you have no more money for trading....

Basically, there are two main objectives of Money Management or Position Sizing:
1) Preserve Capital
Preserving your capital should be the first and the most important objective of Money Management / Position Sizing for a trader.