If you’re a trader, you know there’s a rhythm to the market. 

Most days it’s a hum in the background, but every so often it becomes a blaring siren.

You wake up to headlines about inflation, comments from another Fed official, or some geopolitical mess on the other side of the world. 

Then, of course, futures gap down and the VIX spikes. Media pundits trot out the usual suspects who tell you why “this could be the big one.”

That’s when most traders make their worst decisions.

They panic and chase, throwing size on stuff they barely understand. 

And the one thing they don’t do is think about risk before they hit the button.

Bad move. 

Let’s talk about how to avoid this trap before it bites you too.

Been There, Done That

Early in my career, when I was still trying to prove I could hang with the big dogs, I let the market push me around like that. 

I’d take a good setup and load it with way too much risk. 

When it worked, it felt amazing, but when it didn’t…I’d spend weeks digging out of the hole and trying to rebuild my self-confidence. 

These days, I don’t leave anything to chance, especially when the market starts shaking the tree a little.

Here We Are Again

This week has been one of those weeks. 

Volatility’s picked up, and I’m seeing the signs I always watch for: wide bid-ask spreads, sudden reversals, and zero respect for levels that held just fine two days ago. 

That’s when I go back to my foundation:

Defined risk.

I know, it doesn’t sound sexy. 

You don’t walk into a steakhouse and say, “Give me the smallest thing on the menu with the least amount of spice.” 

But in a market like this, where direction is unclear and every rally feels like it’s walking on eggshells, defined risk is the only way I stay aggressive without getting reckless.

The beautiful thing about a defined-risk trade is that you make peace with the worst-case scenario before you even enter. 

Let’s say a stock is trading at $100.

You think it’s going to go up in the next couple of weeks, but you don’t want to risk buying 100 shares (that’s $10,000 of capital).

Instead, you buy a $105 call option that expires in 2 weeks for $2.00 (or $200 total, since 1 option = 100 shares).

That $200 is your defined risk.

No matter what happens — even if the stock drops to $50 — the most you can lose is the $200 you paid for the option.

If the stock goes to $110, you’re “in the money” by $5…meaning your option is worth $500. Subtract the $200 you paid, and you’ve got a $300 profit.

I’ve been leaning into that structure hard lately, using spreads instead of naked trades, keeping my sizing tight, and focusing on high-probability setups with the potential to pay 2:1 or better. 

That kind of peace of mind isn’t optional if you want to trade for a living. 

One Caveat, Though

I’m not saying defined risk means you stop losing — that’s not how this works. 

What it does mean is your losses stop being fatal. You don’t have to question your process every time a trade doesn’t go your way.

The market’s going to do what it does. You can’t control that. 

But you can control how much you’re willing to lose. 

And if you do that consistently, especially when the VIX is telling you to respect the tape, you’ll last a hell of a lot longer than the guys swinging for home runs with no helmet on.

That’s how I’ve been doing it for years. 

Through good markets, bad markets, and whatever we want to call this market.

Always know what the worst-case looks like before you risk a dollar.

Stay street smart,
Jeff Zananiri