A risk and reward check shows what you plan to lose if the stop is reached and what you plan to gain if the target is reached. Complete this check before entering the options trade.
The numbers will not predict the result. They help you see whether the planned trade fits your rules.
Mark the four inputs
You need:
- Entry price.
- Stop-loss price.
- Target price.
- Quantity.
For a long trade, assume an entry at ₹100, a stop-loss at ₹90, a target at ₹120 and a quantity of 100 units.
The stop distance is 10 points. The target distance is 20 points.
Estimated stop-loss risk = 10 × 100 = ₹1,000
Estimated target profit = 20 × 100 = ₹2,000
The planned reward is twice the planned risk. This is commonly written as a 1:2 risk-to-reward ratio.
For a short trade, reverse the price calculation. Risk is the stop-loss price minus the entry price. Reward is the entry price minus the target price.
Check points and rupees
Points show the structure on the chart. Rupees show the effect of quantity.
If quantity rises from 100 to 300 units, the stop remains 10 points away. The estimated rupee risk rises from ₹1,000 to ₹3,000. The shape of the setup looks the same while the account exposure triples.
Check both values after every change to entry, stop, target or quantity.
Compare the risk with your limits
A favourable ratio does not make an oversized trade safe. Compare the estimated stop-loss risk with:
- Your risk limit for one trade.
- Your remaining daily loss limit.
- Risk in other open positions.
- The capital available in the account.
Reduce quantity or skip the trade when the planned risk exceeds the limit. Moving the stop closer only to make the number fit can change the setup and create a stop that normal movement reaches easily.
Review the target quality
Check whether the target comes from a real chart level or trade rule. A distant target can create an attractive ratio on paper while having little connection to the setup.
Review nearby support, resistance and the normal movement of the option. Also consider how quickly option premiums can change with the underlying price, volatility and time.
Use the ratio as one planning input. Entry quality, liquidity, execution and rule-following still matter.
Want to see target profit and stop-loss risk update together? View the Smart Position Tool example.
Allow for real execution
The calculated amounts are estimates before charges. Your final loss or profit can differ because of:
- Slippage between the trigger and fill.
- Fast price movement or a gap.
- Bid-ask spread and available liquidity.
- Brokerage, taxes and other charges.
- Rejected or delayed orders.
- Connection or device problems for browser-monitored exits.
A stop-loss trigger starts an exit process. It does not promise the final exit price.
Use a 30-second pre-entry check
- Confirm the correct option contract.
- Mark entry, stop-loss and target.
- Check stop distance and target distance in points.
- Check estimated loss and profit in rupees.
- Confirm the quantity matches your risk limit.
- Check where the protective order or monitoring rule will run.
- Allow for charges and possible slippage.
- Enter only when the setup still fits the written plan.
Zensibly's Smart Position Tool shows potential target profit and stop-loss risk in points and rupees. Move the target or stop on the chart and the estimates update. The example is designed to make the trade-off visible before entry.