10 Tips to Manage Risk in a Volatile Options Market

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Tip 4: Temper Your Expectations

Be sure you have a clear understanding of the risk/reward ratio for your trades. Don't assume that a low risk/reward ratio is always a good trade. While the potential loss may be small, the trade may not make sense if losses will be incurred the majority of the time.

By contrast, some strategies with higher risk/reward ratios may be more likely to earn a profit, but when losses do occur, they could be significant. Always consider these factors before you trade.

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