**Key Points**

Trading always involves some level of risk, but “risk” can be defined in many different ways.

Is it the probability of profit compared to the probability of loss? Or is it the amount you could earn compared to the amount you could lose?

Plus, how do you quantify risk? Is it the number of shares or the dollar amount?

Is options trading risky? This is a harder question to answer than you might think, because it depends upon how you define “risk.”

Most traders define risk in one of two ways. The first method is the probability of earning a profit versus the probability of incurring a loss. The second way is the amount of money you could lose compared to the amount of money you could earn. Let’s look at both.

**Probability of profit vs. probability of loss**For traders who define risk as the probability of profit vs. probability of loss, the amount at risk is generally a lesser consideration, because a loss is not anticipated. This type of...

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