Position size calculator
Position size for a premium seller starts with capital, not conviction. One cash-secured put commits the strike times 100 in cash. This calculator takes your account size and your per-position limit and returns the number of contracts that fits, the capital committed, and what a 20% drop in the stock would cost you.
Why the 5% rule keeps showing up
Five percent of the account per position is the number most premium sellers land on, and the reason is arithmetic rather than tradition. At 5% a single position going to zero costs you 5%, and a bad year in which three of them blow up costs 15%, which is survivable. At 20% per position, one blow-up is a fifth of the account and two is a different life.
On a 50,000 dollar account, 5% is 2,500 dollars. That covers one contract on a 22.50 strike, which is what the calculator has loaded. It does not cover a single contract on a 170 dollar stock, and no amount of liking the ticker changes that. It is the rule telling you this account cannot sell puts on this name, and the honest options are a cheaper underlying, a lower strike, or a different strategy.
The risk this calculator cannot see
Correlation. Eight cash-secured puts, each inside a 5% limit, on NVDA, AMD, AVGO, MU, TSM, INTC, QCOM and MRVL is not eight positions. It is one 40% bet on semiconductors with extra commissions. On the day that sector drops 12%, all eight go against you together, and the position-size rule you followed carefully did nothing.
Spread across sectors that do not move together, and count exposure by theme rather than by ticker. That is the part no calculator will do for you.
Read the drawdown line
The output includes what a 20% decline costs at your break-even. That number, not the premium, is the one to look at before you place the trade. If it makes you uncomfortable, the position is too big, and you found that out for free instead of during the print.
Questions people actually ask
Should I size by capital or by max loss?
Both, and take the smaller answer. Capital tells you what you can afford to commit. Max loss tells you what happens when it goes wrong. A cash-secured put has an enormous theoretical max loss, so pure max-loss sizing gives absurdly small positions, which is why capital-based sizing plus a drawdown check is the practical version.
Does selling puts on margin change the sizing?
It changes what your broker lets you do, not what you should do. Margin lets you sell far more contracts than the cash-secured version, and the assignment obligation is identical. Size against the cash you would need if every put were assigned, whatever the buying power number says.
How many positions should I have open?
Enough that no single one decides your quarter, few enough that you can actually watch them. Between five and twelve uncorrelated positions is where most sellers settle. Past that you are running an index with worse execution.