How to Write an Options Trading Plan, With a Template
Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026
In this lesson
Write a one-page options trading plan with risk rules, entry criteria and three exit rules, and check a trade against it.
A trading plan is a short written document that sets out, before you trade, what you will trade, how much you will risk on each trade, and exactly when you will enter and exit. It turns decisions you would otherwise make under pressure into rules you made calmly.
A plan kept only in your head can change when a trade starts moving. Writing it down makes its rules checkable.
What is a trading plan, and why do you need one?
Trading asks you to make decisions at the worst possible moment: with money on the line and prices moving. A written plan moves the important decisions to a better moment, before the trade, when you have nothing to gain from fooling yourself.
A plan does three jobs:
- It limits damage. Your risk rules, such as the position sizing rule from Position Sizing, are written down, so a single bad day cannot quietly become a bad month.
- It makes you consistent. You take the same kind of trade the same way, so your results mean something.
- It gives your journal something to measure. You cannot tell whether a rule works if you only follow it sometimes.
What should a trading plan include?
A beginner's plan fits on one page. It needs six parts:
- Goals. Process goals you control, such as "follow my exit rules on every trade", work better than dollar targets you do not control.
- What you trade. Which stocks, which strategies, and which expirations. For example: long calls and puts only, on stocks with an active options market, 30 to 60 days to expiration.
- Risk rules. Your risk per trade, the most you will have at risk across all open trades, and a loss limit that makes you stop and review.
- Entry criteria. The conditions a trade must meet before you place it, including a reason you can write in one sentence.
- Exit criteria. When you take a profit, when you take a loss, and when you leave because time is running out.
- Review routine. When you read your journal and decide whether a rule needs to change.
How do you set entry and exit criteria for an options trade?
Entry criteria answer "why this trade, why now?" Keep them specific enough that someone else could check them: a named reason for the trade, no earnings report before expiration if you do not want that risk, and a bid-ask spread narrow enough that you are not giving up much just to get in and out.
Exit criteria matter even more, because they are where discipline usually breaks. Every options trade needs three exits, decided before you enter:
- A profit exit. A price or percentage at which you take the gain, rather than hoping for more.
- A loss exit. A point at which you accept you were wrong and close the trade.
- A time exit. A date to close regardless, because the option has a finite life. Time decay often accelerates near expiration for at-the-money options, all else equal; it is not the same for every strike.
The time exit is the one stock traders forget. A share can wait for you indefinitely; an option cannot.
Worked example
A one-page plan, and a trade checked against it
Here is an illustrative plan for a $10,000 account, not a recommended strategy. The example uses standard 100-share contracts and excludes fees; leave room for costs in a real risk budget. Dollar limits here use the starting account value:
Now a hypothetical trade idea: the XYZ 50 call, 45 days to expiration, for $2.00. Assume XYZ closed above its prior 20-session high, no earnings are scheduled before the time exit, and the quoted option spread is $0.08. All three entry checks pass; these invented conditions do not establish that the trade will profit.
- Size: one contract costs $200, exactly the 2% limit. One contract.
- Profit exit: +50% of $2.00 is $1.00, so sell if the call reaches $3.00 (a $100 gain).
- Loss exit: -50% of $2.00 is $1.00, so sell if the call falls to $1.00 (a $100 loss).
- Time exit: close with 21 days left, which is 24 calendar days after buying. If that date is not a trading day, schedule the exit for the preceding trading session.
- Worst case: still $200. A loss exit is a plan, not a guarantee: if XYZ drops sharply overnight, the call can open well below $1.00.
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.
One trade, planned before it is placed
ONE CONTRACT
XYZ 50 Call at $2.00
Max risk
$200
Profit exit (+50%)
$3.00
Loss exit (-50%)
$1.00
Time exit
21 days left
1 contract x $2.00 x 100 = $200 at risk, 2% of $10,000
The weekly loss limit is a trigger to stop new entries and review existing exposure, not a guaranteed cap on losses: open trades and price gaps can carry the account past $400.
Notice that the size uses the full $200 premium, not the planned $100 loss exit. That is deliberate: it keeps the trade inside your risk rule even when the loss exit fails.
What does a trading plan template look like?
Copy this one-page template into a document and fill in one line for each field. Use the worked example above to see what a completed rule looks like. If a field is blank, decide it before your next trade.
The exercise and assignment line matters even for a bought option if it might finish in the money. Check your broker's instructions and deadlines rather than assuming the option will simply disappear at expiration.
How do you stick to a trading plan?
Writing the plan is the easy part. Following it on a losing day is the hard part, and the next lesson, Trading Psychology, covers the traps that pull traders off their plans. A few habits help:
- Check the plan before every trade, like a pilot's checklist.
- Decide exits before you enter, and write the exit prices down.
- Change rules only during a review, never in the middle of a trade.
- Log every trade, so you can see whether you followed the plan.
From idea to review: the plan at every step
Trade idea
A reason you can write in one sentence
Check the plan
Entry rules, open risk, loss limit
Size and set exits
Contracts from your risk rule; profit, loss and time exits
Log and review
Journal it; review the plan on schedule
Check your understanding
What three exits should an options trade have before you enter it?
Show answer
A profit exit (when you take the gain), a loss exit (when you accept you were wrong), and a time exit (a date to close regardless, because a bought option loses time value as expiration nears).
Your plan risks 2% of a $15,000 account per trade. What is your dollar risk per trade?
Show answer
$300. $15,000 x 2% = $300.
Why does the worked example size the trade on the full $200 premium instead of the planned $100 loss exit?
Show answer
Because the loss exit is not guaranteed. If the stock gaps down overnight, the option can open below the exit price, so the trade must fit the risk rule even if the whole premium is lost.
Key takeaways
- A trading plan writes down your goals, what you trade, your risk rules, and your entry and exit criteria before you trade.
- Every options trade needs a profit exit, a loss exit and a time exit, decided in advance.
- Size trades on the true worst case, not on a planned exit that might be skipped.
- Change the plan during scheduled reviews, one rule at a time, not in the middle of a trade.
Common questions
What is a trading plan?
A trading plan is a short written set of rules for how you trade: your goals, what you trade, how much you risk per trade, and when you enter and exit. You write it before trading, so decisions are made calmly rather than in the moment.
How do you write a trading plan for options?
Write one page that covers, at minimum: your goals, the markets and strategies you trade, your risk per trade and loss limits, your entry criteria, your exit rules for a profit, a loss and running out of time, and how often you review your results.
How long should a trading plan be?
Short enough to read before every trade. One page is plenty for a beginner. A plan you never reread does not help; a short one you check each time does.
How often should you review a trading plan?
On a schedule, not in the middle of a trade. Review it every few weeks against your journal, change one rule at a time, and write down why you changed it.