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From Theory To Practice

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Notional Shares at Risk

From Theory To Practice

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Most of the time, we use Buying Power Reduction as a proxy for the size of a position and the risk in a trade. From a P/L standpoint, this makes perfect sense. But from a purely size standpoint, it might also be helpful to understand just how many shares of stock we must absorb, in the event that the position goes against us and we take assignment.

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