Most people move through life carrying a quiet set of assumptions about how things “ought” to work.
We often build these assumptions from our first experiences when learning something new — keeping your hands at “two and ten” while driving or leaving the house three hours before a flight so you don’t miss your plane.
These habits become little safety mechanisms we build into our routines. Over time, they turn into rules we follow without ever asking whether they still make sense.
This same pattern shows up when people enter the world of investing and trading.
Most traders stick to the tools and rules they learn first. Because most people start with stocks, they naturally inherit stock-trader rules.
Things like cutting losers quickly, avoiding any kind of averaging down, and using stops to protect yourself from downside risk all feel like universal truths. They work in the stock world, especially when you’re new, because stocks can have significant and unlimited downside.
But just like those habits I mentioned at the top, stock-trading rules don’t automatically translate when you step into a completely different environment. And nowhere is that more obvious than in options trading.
Different Trade, Different Rules
Options operate on a different foundation than stocks. The mechanics are different, the pricing is different, and most importantly, the risk structure is different. The “safety net” that feels comforting inside a stock-trader’s toolbox simply doesn’t fit a defined-risk vehicle like options.
And when traders carry old habits into new territory, those habits often work against them.
Because here’s the truth — and I say this knowing it goes against most mainstream trading advice: I do not use stop-loss orders with options. At all. And I believe avoiding stops is not only safer — it’s more conservative.
That may sound counterintuitive if you come from a stock-trading background. It might even sound reckless.
But for options? For volatility? For the asymmetric opportunities they create? For risk-defined trading?
Stops aren’t a safety net. Stops are a trap.
And today, I want to walk you through why stops sabotage options traders and why the market structure itself works against them. I’ll show you the simple, systematic framework I use instead that gives me more control, more consistency, and more durability in my trades.
What Professional Options Traders Actually Do
Professionals in the options world don’t lean on stop-loss orders the way stock traders do. This is something I emphasize whenever I talk about risk.
When I was a market maker, we never used stops to manage exposure because stops introduce uncertainty into a product that already gives you perfect clarity about your maximum loss.
Our job was to size positions properly, price volatility correctly, and let the trade play out unless something in the underlying thesis materially changed.
That structure — predetermined risk, clear thesis, and no reactive exits — is the backbone of professional options trading.
So when I teach traders not to use stops, it’s not a contrarian stance or a personal quirk. It’s the same framework I learned on the floor, where the only way to survive was to control your own risk and never let normal volatility eject you from a position.
Market makers don’t get shaken out by beta moves, widening spreads, or morning flushes, and they certainly don’t hand that control over to the market. They build trades with fixed risk and stay in them until the thesis breaks — and that’s the structure I bring into every strategy I teach.
The Advantage of Defined Risk
I know that trading can feel fast when you’re just getting started. Until you get your sea legs, it’s hard to know what’s normal market noise and what actually matters.
One of the most important lessons you can learn about trading options is that sometimes options expire worthless, even when your thesis is right. That’s not a personal failure — that’s the nature of defined-risk trading.
According to a Chicago Board Options Exchange (CBOE) study, more than two-thirds of all options expire out of the money. That sounds scary, but like any risk worth taking, it becomes far less scary once we understand how to manage it.
That’s exactly why I hammer on the importance of deciding how much you’re willing to risk before you ever enter a trade. When the risk is predetermined, nothing the market does can take you out of the game early unless you let it.
When you buy an option, your maximum possible loss is defined the moment you enter the trade. If you pay $300 for a contract, the worst-case scenario is losing $300.
There’s no scenario where that loss expands because of a fast-market fill, a gap down, or a liquidity vacuum. Options offer fixed, non-expandable risk.
That alone makes stop-loss orders unnecessary.
But more importantly, stops get traders into trouble because they respond to the price alone and not the thesis.
When we enter a trade, it’s because we have conviction about the idea, the catalyst, and the story behind the move — not because we expect the price to march in a straight line the next morning.
A price drop doesn’t mean your idea is wrong — more often than not it means the market is doing what markets do.
Stops don’t know the difference, and they kick you out anyway.
This is where many just starting out stumble — they confuse motion with meaning. Markets wiggle, shake, lurch, and breathe. Stocks get dragged down because the index sells off. Volatility widens bid/ask spreads. Beta pushes everything lower at once.
These events aren’t a referendum on all of the hard work that went into your research.
Why Stops Get You Out of Trades for the Wrong Reasons
When we’re trading options, we’re not trading one tick or two ticks of price action. We’re trading an idea — a shift in a business model, a long-term catalyst, a value disconnect, or a wave of unusual options activity from big money.
If AMC is transitioning to a subscription model, or if a UOA spike signals institutional conviction, that thesis doesn’t vanish because the S&P dropped for a day.
The idea is still valid, even if the price stumbles for reasons unrelated to the trade.
But this is exactly where stops work against you. They respond to short-term movement, not long-term logic.
They treat every pullback as a verdict on your research, even when the move is just beta dragging everything down together. The result is that you can get stopped out of a strong, well-reasoned position for no reason other than market noise.
In the case of our AMC trade, the stock dipped right after we entered. But the drop had nothing to do with AMC’s story — it was simply the index pulling names down in unison.
Once the market stabilized, AMC stabilized. And the trade continued to follow the thesis we outlined from there. A stop-loss would have thrown you out of a perfectly valid idea long before it had a chance to work.
This is why I underline this lesson so strongly: stops allow the market to dictate your decisions.
My approach — the approach I learned as a market maker — asks traders to control their own decisions. When the thesis drives the exit instead of the volatility, you trade with discipline and conviction instead of emotion.
Fixing Our Risk, One Slice at a Time
But just because we’re not using stops doesn’t mean we’re ignoring our risk — far from it.
Instead of stops, I use a structure that is far more predictable: a fixed risk budget and laddered entries.
Allow me to explain.
Before I enter a trade, I decide exactly how much I’m willing to risk on the entire idea. If the number is $1,000, then $1,000 is the most I can lose — not a penny more. That decision is made ahead of time, calmly and logically.
Once that number is set, I divide it into three equal pieces — so a $1000 trade would be broken up into tranches (that’s French for “slice”) of about $333 each.
We enter the first tranche at our initial price. If the stock moves against us, we add the second tranche. If the pullback continues, we add the third. Some traders refer to this as “laddering.”
This creates a lower average cost, giving us more time in the trade, and eliminates the frantic feeling of being “wrong” on our timing simply because the price moved.
Laddering doesn’t mean we’re averaging down blindly. It’s a structured way of deploying a predetermined risk amount. We’re not adding risk — we’re allocating our predetermined risk.
Instead of feeling threatened when a trade moves against us, we see pullbacks as an opportunity to improve our position.
This isn’t a reaction, but rather following a plan we built ahead of time. And because options cap our risk, the plan cannot expand beyond what you approved.
Conclusion: Structure, Conviction, and the Path Forward
Everything we’ve covered in this piece leads to a simple truth: success in options trading doesn’t come from reacting to every wiggle in the market. It comes from structure. It comes from discipline. And it comes from the confidence to stick to a plan we built long before the volatility tried to shake us out.
Options give us a rare advantage in the trading world — the ability to define our maximum risk on day one and keep total control over our decisions. When we choose our size intentionally, ladder our entries, and commit to our thesis instead of the noise, we stop handing the steering wheel to the market. We trade with clarity instead of fear, patience instead of panic, and logic instead of emotion.
This approach isn’t about perfection. It’s about staying in the game long enough for our edge to play out. Some trades will expire worthless — that’s part of it. Some trades will feel uncomfortable before they work.
But when we keep our size appropriate, honor our plan, and stay focused on the bigger opportunity rather than the minute-to-minute fluctuations, we put ourselves in the best possible position to succeed.
If this way of thinking feels different from what you’ve been taught — good. It should feel different. Most traders never get the chance to unlearn the habits that hold them back.
They never get exposed to a risk-defined system. They never get taught how professionals actually build trades, manage exposure, and survive volatility.
And that’s exactly why I created the Masters in Trading Options Challenge.
The Challenge is where we take everything you’ve learned in this piece — fixed risk, thesis-driven exits, laddered entries, defined-duration trades, and emotional discipline — and put it into practice in a structured, step-by-step environment. For two weeks, we walk through the foundations of real options trading the way I learned them on the trading floor. You’ll learn exactly how I think, exactly how I build trades, and exactly how I manage both the winners and the losers.
If you’ve ever wanted to trade options with more clarity…
If you’ve ever wanted a system that keeps you calm when the market isn’t…
If you’ve ever wanted to stop guessing and start understanding…
…then the Challenge is the perfect next step.
I’d love to see you inside. Let’s trade with intention.
Let’s trade with structure. And let’s do it together — the right way.
Remember, the creative trade wins,
Jonathan Rose
Founder, Masters in Trading
