Risk Management2023-07-04T00:59:53+00:00

Risk management

Risk management is a core tenet of our trading approach at Elliott Wave Options. Very simply if you don’t manage risk, you will very soon lose your capital and that will put an end to your trading activities. It’s important to consider this when choosing which EWO subscription might be appropriate for you.


Limited Risk in Every Position

One of the potential concerns about option trading, particularly for those that are new, is that options are risky. This risk only occurs when you don’t know what you’re doing!

At Elliott Wave Options, where all about managing risk first. And that means that we never issue trades that have unlimited risk to our customers. After all, we’re here to help you learn how to trade safely. Managing risk is the first step to becoming a successful trader. There is no doubt that from time to time you will have losing trades, so it is paramount that any single one of those trades represents only a small limited amount of risk in relation to your available trading capital… I.e. the balance of your trading account.

As a subscriber, you’ll find that none of our trades exceed a net cost of more than US$500 to be able to enter the position, and whatever you invest in the trade is the total amount that you could possibly lose unless you decide to add more capital to the trade. We never trade naked options in any circumstance. Wherever we are selling an option, it is always part of a spread that covers any risk that might come from holding a short option.
EWO - balance trading risks and rewards

Positions Sizing vs. Stop Loss Orders

An important aspect of risk management at Elliott Wave Options is the sizing of positions relative to the available capital in your trading account.

We focus on position sizing for risk management rather than using stop loss orders because of the volatility in option prices. In percentage terms, option prices move significantly more than stock prices on a day-to-day basis because of the effect of leverage. Option prices also reflect not only the movements in the underlying stock, but also changes in volatility and the effects of time decay. It is our experience that trying to implement stop loss orders around option prices results in the trade commonly being stopped out before the price target for the trade has been achieved. Therefore, rather than using stop loss orders, we implement a strict regime of position sizing so that at any time we have limited risk in any one position.

This approach to risk management should be followed with a disciplined approach regardless of whether you are trading our Premium or HighValue trade alerts!

All our trade alerts carry limited risk

Another aspect of risk management at Elliott Wave Options is that we are always net “buyers” of options so that our trade alerts that have limited risk. This means that the maximum amount that you can lose in anyone trade is the amount of capital that you have committed to that trade.

New to options trading? Read this article for some tips on getting started …

Stay informed and learn more on our blog, helping you become a better options trader. Our News page is a great learning resource.

Frequently asked questions

I’ve heard that option trading is risky. Is that true?2021-01-03T21:47:57+00:00

There is no doubt that there is risk in trading options, however just like anything else, if you take the time to learn to do it properly then you can manage that risk appropriately. This is exactly what we aim to teach subscribers and the true value of our service! All of the positions for which we send trade alerts to our subscribers are for “limited risk” trades. In other words, you won’t be able to lose more than the capital that you commit to the trade. For our entry level Premium subscriptions we recommend never risking more than $500 in any one trade. This way you can be certain that you will not lose your entire trading account while you are learning.

What do the Trade Alert subscriptions include?2021-01-03T21:37:00+00:00

EWO Trade Alert subscriptions include specific notification, via SMS & Email, of trading opportunities … both Entries, Exits and any additional adjustments require to manage the trade along the way. Premium Level subscriptions also include access to all Premium Level Trading Education courses, while Our HighValue Subscriptions add access to both additional trading opportunities and additional Mastery Level Courses.

How does the free TradeFinder Work?2021-01-03T21:40:49+00:00

TradeFinder is a free subscription that provides you access to a live weekly webinar where Rob looks for case study trades. You’ll gain insight into how Rob is identifying these trades… including his strategies, analysis techniques and the tools he uses. You’ll see him using Elliott Wave analysis and his confirming indicators. Essentially you are getting a behind the scenes look at how he selects trades for Subscribers to receive. Each week Rob will select a potential trade that you may choose to follow. Each weekly TradeFinder session is also recorded so you have access to it on-demand should you not be available to attend the live session.

When you issue a trade alert, wouldn’t all subscribers orders affect the prices?2020-12-04T00:19:56+00:00

Yes, the nature of any market is that as you enter orders, you will impact the supply and demand… and consequently the prices in the market. However, in general we try to select trades in markets that have large volumes of trading and significant open interest. In this way, even if we have a significant number of subscribers attempting to enter the same trade, we will still represent a relatively small proportion of the market. Consequently, all subscribers should be able to have their orders filled relatively closely to the Recommended Price.

How much can I expect to make with your service?2020-12-04T00:20:20+00:00

We do publish our track record in detail to give you confidence that we know what we are talking about and to show you what we are achieving, however we specifically don’t provide any statement of how much money you can make by following our trades. We are not providing specific or personal financial advice and we are not investing or trading your money on your behalf. We are providing an educational advisory service. You can choose to follow along with our trade alerts in your own account, however how you select and manage those trades is up to you.

How much money do I need to trade with to follow your service?2021-01-03T21:39:39+00:00

Each one of our services provides a recommended amount of capital that you’d need in your trading account to follow our alerts.
We also provide a minimum level and, to be conservative, we size our trades based upon that minimum level.

However, ultimately how much money you trade with is up to you. We do suggest a recommended amount because, as part of the education we provide, we believe that you need to learn about having adequate capital to allow you to practice appropriate risk management and achieve acceptable returns, even when the costs of brokerage is taken into account.

Click here for more information about required capital and managing risk

How much should I allocate to any given trade?2020-12-04T00:20:45+00:00

Money management is very important to ensuring you preserve your trading capital even in the face of a few losing trades. We generally size our trades at about 5% of recommended trading capital for each particular service.

Can I just subscribe for the month?2020-12-04T00:23:35+00:00

Yes, subscribing to EWO is done on a monthly proposition. We know its common practice for other educators and trade alert providers to insist you pay for 1 or even 2 years in advance. We don’t believe this helps someone who is trying to learn to trade for a few reasons, a) Committing a large amount of money puts pressure on you You don’t know if a certain approach is going to work for you until you learn about it in some detail.

Are Trade Alerts Issued Every Day?2020-12-04T00:21:17+00:00

No, Trade Alerts are NOT issued every day.

In fact, you’ll find that there are probably at least as many days were trade alerts are not issued, as days where trade alerts are issued.

The average time for most of our trades is slightly longer than 1 month, or several weeks, therefore it takes a while for trades to develop and ultimately be exited. While we are in those trades, the capital in our account is tied up so we don’t issue additional trades until we’ve exited positions and capital becomes available.

This approach is very beneficial for subscribers because it means you should be able to follow all of the trade alerts and the level of trading activity is manageable.

Another point to note is that due to the fact that we are trading specific strategies, we only provide Trade Alerts when there are opportunities that match the criteria for our strategies. Depending on market conditions there can be periods where very few signals are generated. However, the other side of this is that there are some periods where there are a lot of signals generated. It is not uncommon for exits and entries to come in clusters.

Regardless of whether alerts are being issued or not we monitor the market every day. So be assured that even if we aren’t issuing alerts, we are watching the market every trading session to manage our open positions and identify new opportunities for subscribers.

Can I really cancel at any time?2020-12-04T00:21:31+00:00

Yes, you can cancel at any time by simply logging into your account and clicking the “Cancel” button. Your credit card will not be billed again. Note you will still have access to the service until the end of your current subscription, even though you have cancelled.

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