Risk management is critical to successful options trading. It’s about defining the level of risk you’re willing to accept, setting appropriate limits, and developing strategies to mitigate potential losses. This might involve setting stop-loss levels to automatically close trades if losses exceed a certain amount, diversifying your portfolio to spread risk, or using certain strategies to hedge against adverse market movements.

– Reference: [Investopedia: How Option Trading Works](https://www.investopedia.com/articles/active-trading/052014/how-option-trading-works.asp)