Does anyone have any suggestion on how to determine position size based on volatility and leverage?

For example

daily range = $3, which risk $300 per contract.

maximum of risk is 2% of equity [50000] = 1000

leverage of products = 4 and 12 times

Do you have any suggestion on determining the position sizing for each leverage 4 / 12?

Thank you for any suggestion

Eric

## How to determine position size based on volatility?

### More description about managing leverage and volatility for

Thank you for your reply

More description about managing leverage and volatility for position sizing

Usually, I can find leverage of trading products around 10 times, therefore, I feel comfortable to set 10 as my default leverage. For a rare case on bull market, I can only find 5 times for Call Option and 25 times for Put Option, therefore the problem for position sizing appears. My invested equity is $1000, if I expect the market moving up, then I can buy Call at 5 times leverage within $1000 equity, on the other hands, if I expect the market making top and turn down, then I can buy Put at 25 times leverage with $1000 equity.

Assume ATR = $3, which equal to 3% of stock price at $100

For Call, if the market moves up $3, then profit will be 5 x 3% = 15% of invested equity.

For Put, if the market moves up $3, then loss will be 25 x 3% = 75% of invested equity.

Therefore, if I insist on investing $1000 equity for both Call and Put, it will make my equity curve more volatile. For Call, the leverage [4] is less than my expected leverage [10], so I would like to increase the invested equity to match the performance of leverage [10]. For Put, the leverage [25] is more than my expected leverage [10], so I would like to decrease the invested equity to the performance of leverage [10], but I don't know how to approach for this situation. Does anyone have any suggestion?

Thanks you for any suggestion

Eric

More description about managing leverage and volatility for position sizing

Usually, I can find leverage of trading products around 10 times, therefore, I feel comfortable to set 10 as my default leverage. For a rare case on bull market, I can only find 5 times for Call Option and 25 times for Put Option, therefore the problem for position sizing appears. My invested equity is $1000, if I expect the market moving up, then I can buy Call at 5 times leverage within $1000 equity, on the other hands, if I expect the market making top and turn down, then I can buy Put at 25 times leverage with $1000 equity.

Assume ATR = $3, which equal to 3% of stock price at $100

For Call, if the market moves up $3, then profit will be 5 x 3% = 15% of invested equity.

For Put, if the market moves up $3, then loss will be 25 x 3% = 75% of invested equity.

Therefore, if I insist on investing $1000 equity for both Call and Put, it will make my equity curve more volatile. For Call, the leverage [4] is less than my expected leverage [10], so I would like to increase the invested equity to match the performance of leverage [10]. For Put, the leverage [25] is more than my expected leverage [10], so I would like to decrease the invested equity to the performance of leverage [10], but I don't know how to approach for this situation. Does anyone have any suggestion?

Thanks you for any suggestion

Eric