Options Trading Checklist: Building a Strategy in Review
Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026
In this lesson
Run any Course 2 trade through a five-question pre-trade checklist and read its maximum profit, maximum loss and break-even from one table.
An options trading checklist is a short, fixed list of questions every trade must pass before you place it: does the strategy fit, is the worst case known and acceptable, does the size fit, are the exits written, and is anything scheduled that could break them? It is your trading plan reduced to something you can apply in a minute, and it is the last step of this course.
This lesson closes Building a Strategy. It gives the checklist, then one table that reviews every strategy in the course from the same quote sheet, and then points to where the next course begins.
What should be on a pre-trade checklist?
Five questions, in order. A "no" to any of them ends the trade idea; it does not move you to the next question.
- Does the strategy match my goal and outlook? Write the outlook with a price and a date. If the trade needs shares you would not be glad to own, the answer is no.
- Do I know the worst case in dollars, and can I accept it? For a stock-backed position, that is close to the cost of the shares.
- Does the size fit? Defined-risk trades: floor(risk budget / maximum loss). Stock-backed trades: the put strike times 100, or the share cost for a covered call, inside the per-stock and total capital caps. Total open risk still inside its cap.
- Are the exits written down? Profit, loss and time exits as prices and dates, plus the assignment rule for any short option.
- Is anything scheduled before expiration? An earnings report, or an ex-dividend date if you are short a call. If yes, the plan says what you do, before you enter.
Then place the order and log the trade with its rules in your journal.
The pre-trade checklist, in order
Goal and outlook
Which strategy fits, and why now?
Worst case
Known, in dollars, and acceptable?
Size
Within the risk and capital caps?
Exits
Profit, loss and time exits written?
Scheduled events
Earnings and ex-dividend dates planned for?
Place and log
Journal entry with the plan's rules
How do the Course 2 strategies compare in one table?
One stock, one set of hypothetical quotes (set by hand, not model prices): XYZ at $48, 45 days to expiration, with the 48 call at $2.00, 52 call $0.80, 48 put $1.90, 45 put $0.80 and 40 put $0.20. Figures are per position at expiration, before fees. "To zero" means the stock falling to $0.
Three formulas cover most of the table. A debit spread's maximum loss is the debit paid, and its maximum profit is the strike width minus the debit. A credit spread's maximum profit is the credit received, and its maximum loss is the strike width minus the credit. A covered call's or cash-secured put's maximum loss is the cost of the shares minus the premium received, which is why both are large-risk strategies. The Risk and Reward Math module works through each one.
Course 2 at a glance: six strategy shapes
Covered call
Max profit $480
Max loss $4,720
Cash-secured put
Max profit $80
Max loss $4,420
Protective put
Max loss $380
Upside open
Collar
Max profit $400
Max loss $300
Bull call spread
Max profit $280
Max loss $120
Bear put spread
Max profit $190
Max loss $110
Gray line: zero, where the position breaks even. Dashed line: strike. Each sketch shows profit or loss at expiration as the stock price rises from left to right.
The covered call and cash-secured put rows are the only ones with losses in the thousands: the 45 put can lose up to $4,420 if XYZ went to zero. Treat both as large-risk strategies in every checklist.
Worked example
One trade idea through the checklist
The idea: "XYZ stays above $45 for the next six weeks." The plan from A Worked Example Plan allows bull put spreads on a $25,000 account with a $500 per-trade budget and a $1,500 total cap, of which $920 is already open in other stocks.
- Goal and outlook: neutral to up, with a level and a date. A bull put spread fits. Yes.
- Worst case: the 45/40 spread for $0.60 can lose $440. Acceptable under the plan. Yes.
- Size: floor($500 / $440) = 1 spread. Open risk becomes $920 + $440 = $1,360, under $1,500. Yes.
- Exits: buy back at $0.30, at $1.80, or with 21 days left. Yes.
- Scheduled events: an earnings report lands in four weeks, before expiration but after the 21-days-left time exit. The plan forbids holding through earnings, and the time exit closes the trade first, so the event is planned for. Yes.
The trade passes. Had the earnings date fallen before the time exit, question 5 would have been a no, and the idea would wait.
Illustrative and hypothetical. The ticker and prices are invented for teaching, and the figures exclude commissions, fees, margin interest and taxes, which reduce real results. Past or hypothetical outcomes do not indicate future results.
What comes after Building a Strategy?
This lesson completes Building a Strategy. You can now explain and size covered calls, cash-secured puts, protective puts and collars, and all four vertical spreads; work out each one's maximum profit, maximum loss and break-even; manage trades with written exits; and run them under a plan with a weekly review.
The next course, Advanced Strategies, builds on exactly these pieces: iron condors and butterflies combine two vertical spreads, straddles and strangles trade volatility rather than direction, and calendar and diagonal spreads trade time. It also covers managing Greeks across a whole portfolio and using your own journal to find what works for you. The plan and journal from this module are where that course starts.
Check your understanding
A bear call spread sells the 48 call for $2.00 and buys the 52 call for $0.80. What are its maximum profit and maximum loss?
Show answer
Maximum profit is the $1.20 credit, $120. Maximum loss is the $4 width minus the credit, ($4.00 - $1.20) x 100 = $280. Break-even is $48 + $1.20 = $49.20.
Your open defined risk is $1,200 of a $1,500 cap. Does a new $440 spread pass question 3?
Show answer
No. $1,200 + $440 = $1,640, over the $1,500 cap, so the trade fails the size question even if it fits the $500 per-trade budget.
What does a 'no' on any checklist question mean?
Show answer
The trade idea ends, or waits until the answer changes. You do not move to the next question or adjust the rule to make the trade fit.
Key takeaways
- A pre-trade checklist asks five questions: fit, worst case, size, written exits, and scheduled events.
- Any "no" ends the trade idea; the checklist is the plan applied to one trade.
- Debit spreads risk the debit; credit spreads risk the width minus the credit; stock-backed positions risk most of the shares' value.
- Advanced Strategies builds on these spreads, the risk math and the plan and journal from this module.
Common questions
What should I check before placing an options trade?
That the strategy fits your goal and outlook, that you know the worst case in dollars and can accept it, that the size fits your risk and capital limits, that profit, loss, time and assignment exits are written down, and that there is no earnings report or ex-dividend date you have not planned for.
What is a pre-trade checklist?
A short, fixed list of questions you answer before every trade. Any question you cannot answer yes to ends the trade idea. It turns your trading plan into something you can apply in under a minute.
What comes after learning basic options strategies?
Trading the basic strategies under a written plan long enough for your journal to show how they work for you. After that, iron condors build on vertical spreads, while straddles, strangles and calendar spreads combine single calls and puts, all using the risk math from this course.
What is the maximum loss on a covered call?
The stock's price minus the premium, times 100, if the stock went to zero. For 100 shares bought at $48 with a 52 call sold for $0.80, that is ($48 - $0.80) x 100 = $4,720 before fees.