Buying power tells you what an account can place, not what it can responsibly lose. Position sizing begins with a permitted rupee loss and works backward to quantity.
Set the loss budget first
Choose a risk amount based on capital and personal risk capacity before considering the number of lots. The percentage should be small enough that one outcome does not control the account.
Measure entry-to-stop risk
For a long option, the difference between planned entry and stop reference provides an initial per-unit risk estimate. Add realistic allowance for spread and slippage.
- Premium distance
- Lot size
- Number of lots
- Execution allowance
Recalculate when the trade changes
A different entry, stop or contract changes the risk. Quantity should be recalculated rather than copied from a previous trade.